Rahn - Shariah Requirements and Optional Practices

Transcription

1. Rahn 4 of 27 PART B SHARIAH REQUIREMENTS AND OPTIONAL PRACTICES 7 Compliance with Part B 7 .1 An IFI which uses the rahn contract for its products and services must ensure that such products and services are in compliance with Part B of this policy document. 8 Definition 8.1 Rahn refers to a contract where a party, as pledgor (rahin) pledges an asset as collateral (marhun) to another party, a pledgee (murtahin) to fulfil an obligor’s liability or obligation (marhun bih) owing to the pledgee in the event of default of such obligor. 9 Nature S 9.1 The inherent nature of rahn is the assurance that the liability or obligation owed by the obligor to the pledgee will be fulfilled in the event of a default as agreed in the terms and conditions of rahn. S 9.2 Rahn is binding on the pledgor upon entering into the contract. The pledgor does not have the right to revoke the rahn contract without the consent of the pledgee. S 9.3 Terms and conditions that have been mutually agreed upon and are consistent with Shariah principles shall be binding on the pledgor and pledgee. 10 Components of a rahn contract 10.1 A rahn contract shall consist of the following components: (a) the pledgor and pledgee (collectively referred to as contracting parties); (b) the offer (ijab) and acceptance (qabul) to enter into the rahn contract; and (c) the subject matter of the rahn contract. 11 Contracting parties S 11.1 The contracting parties in a rahn contract shall, at a minimum, comprise a pledgor and a pledgee. G 11.2 The pledgor in the rahn contract may be an obligor or a third party pledgor. S 11.3 A contracting party shall be a natural person or legal entity that must have the legal capacity2 to enter into the rahn contract. S S S 2 From Shariah perspective, legal capacity of a natural person is defined as the capacity to assume rights and responsibilities and capacity to give legal effect to his action. Among the important
2. Rahn 5 of 27 11 .4 Any party to the rahn contract may enter into the contract through an agent (wakil). 12 Offer (ijab) and acceptance (qabul) S 12.1 The rahn contract must be entered into through an offer and acceptance between the contracting parties. G 12.2 The offer and acceptance may be expressed orally, in writing or by any other methods recognised by Shariah. 13 Subject matter of rahn S 13.1 The subject matter of the rahn contract shall be– (a) collateral that is recognised by Shariah; and (b) Shariah-compliant liability or obligation owing to the pledgee. S 13.2 The subject matter of the rahn contract must be determined upfront, made known to and accepted by the contracting parties. 14 Salient features of rahn G Type of collateral G 14.1 In relation to paragraph 13.1(a), collateral recognised by Shariah in a rahn contract may be– (a) a physical asset that is used to carry on activities which are Shariahcompliant or otherwise; or (b) a financial asset that is Shariah-compliant, partially Shariah-compliant (referred to as mixed financial asset) or Shariah non-compliant. S 14.2 In relation to paragraph 14.1(b)– (a) where a mixed financial asset is used as collateral, the core business of a person issuing such asset must be Shariah-compliant; and (b) where a Shariah non-compliant financial asset is used as collateral, the recognised collateral value must be limited to the principal amount of the financial asset. conditions are that the person must possess sound mind and the capacity to distinguish between what is harmful or beneficial to one’s interests. The legal capacity of a legal entity is defined as eligibility of an entity to acquire rights and assume responsibilities. In Malaysia, the legal capacity of both natural person and legal entity is governed by the Contracts Act 1950 and the Age of Majority Act 1971.
3. Rahn 6 of 27 Ownership of collateral S 14 .3 The collateral must be owned either by– (a) the obligor; (b) a third party; or (c) the obligor and a third party. G 14.4 In relation to paragraph 14.3, the pledgor may pledge an asset that will exist and will be owned in the future as collateral under a rahn contract. S 14.5 In the case where the pledgor pledges collateral that is wholly or partially owned by a third party under paragraphs 14.3(b) or 14.3(c), the pledgor must obtain the third party’s consent to pledge such collateral. G 14.6 An undivided asset that is jointly owned by the pledgor with another third party may be pledged– (a) in proportion to the value of the pledgor’s ownership; or (b) as a whole in the event the undivided asset cannot be pledged in proportion to the value of the pledgor’s ownership, provided that the consent of the third party is obtained. Possession of collateral S 14.7 Unless a pledgee approves a delay in possession, the collateral shall be immediately possessed by the pledgee upon entering into rahn contract. S 14.8 Possession of collateral by the pledgee shall be in the form of– (a) physical possession (qabd haqiqi); or (b) constructive possession (qabd hukmi). G 14.9 The contracting parties may mutually agree for the possession of the collateral to be transferred to a third party for safekeeping. S 14.10 Collateral in a rahn contract shall be held on trust (amanah) by the person who is in possession of such collateral. S 14.11 In the event of a misconduct (ta`addi), negligence (taqsir) or breach of specified terms (mukhalafah al-shurut) by the person in possession of the collateral, he shall be liable and shall compensate for the damage or loss of such collateral. Multiple pledgees S 14.12 If an asset is used as collateral with more than one pledgee under more than one rahn contract, the following requirements shall apply: (a) where the pledgees are ranked equally (pari passu)– (i) the consent of all pledgees must be obtained; and (ii) the pledgees’ rights in the collateral will be shared in proportion to their respective debts; or (b) where the pledgees are ranked in a way that the right of claim of a
4. Rahn 7 of 27 preceding pledgee is prioritised over a subsequent pledgee , the consent of the succeeding pledgee shall be obtained. Return of asset S 14.13 The pledgee or third party, as the case may be, shall return the collateral upon the obligor’s fulfilment or discharge of his obligations unless the contracting parties agree to enter into a new rahn contract using the same collateral. G 14.14 Notwithstanding paragraph 14.13, the contracting parties may agree for the collateral to be kept by the pledgee for any subsequent obligation within a period agreed by the contracting parties. Liability or obligation (marhun bih) S 14.15 In relation to paragraph 13.1(b), a liability or obligation owing to a pledgee shall be an obligation that must be fulfilled by the obligor. G 14.16 The liability or obligation may include those arising from any or a combination of the following: (a) a loan contract (qard); (b) exchange contracts (mu`awadat); (c) debt from the termination of sale contract; (d) compensation on misconduct, negligence or breach of specified terms; or (e) compensation for breach of wa’d. S 14.17 The liability or obligation must be that– (a) it is already established; or (b) will be established. MANAGEMENT OF RAHN 15 Utilisation of collateral G 15.1 The collateral may be utilised by the owner with or without the consent of the pledgee. S 15.2 In relation to paragraph 15.1, the utilisation by the owner must not affect the rights of the pledgee on the collateral. S 15.3 The pledgee shall only utilise the collateral if the following requirements are met: (a) consent has been obtained from the owner; (b) the liability or obligation owed by the obligor to the pledgee does not arise from a loan contract (qard); (c) terms of utilisation by the pledgee is stipulated in the contract; and (d) the period of utilisation by the pledgee is specified.
5. Rahn 8 of 27 16 Expenses in rahn S 16 .1 Expenses in rahn are categorised into– (a) expenses incurred that are directly related to the maintenance3 of collateral; and (b) all other expenses incurred that are directly related to the rahn contract including safekeeping, documentation, liquidation and discharging of collateral. S 16.2 The owner of the collateral shall bear all expenses under paragraph 16.1(a). S 16.3 Except otherwise agreed by the contracting parties, the pledgor shall bear all expenses under paragraph 16.1(b). G 16.4 In the event the owner or pledgor fails to fulfil its obligations in accordance with paragraphs 16.2 or 16.3, the pledgee may provide cash advance to pay the expenses on behalf of the owner or pledgor. S 16.5 Subject to paragraph 16.3, any advances paid by the pledgee to settle the expenses under paragraph 16.4 shall be considered as a debt owing to the pledgee and the pledgee reserves the right to claim it from the owner or the pledgor as the case may be. 17 Liquidation of collateral S 17.1 The liquidation of collateral shall be carried out in accordance with the terms of the agreement entered into by the contracting parties. G 17.2 The contracting parties may stipulate at the time of entering the rahn contract that the owner authorises the pledgee, his agent or other party to perform the liquidation process. S 17.3 In the absence of any stipulation as per paragraph 17.2, any person who performs the liquidation process must obtain prior approval of the owner. G 17.4 The liquidation of collateral may be performed in whole or in part. S 17.5 In the event a mixed financial asset is liquidated, the liability or obligation owing to the pledgee must be fulfilled in any of the following manner: (a) provided that the mixed financial asset can be segregated, only proceeds from the Shariah-compliant component of the mixed financial asset may be utilised; or (b) in the event that the mixed financial asset cannot be segregated, all of the proceeds may be utilised. 3 This is maintenance that would have to be done even if the asset was not being used as collateral in a rahn contract.
6. Rahn 9 of 27 S 17 .6 The pledgee has the right to claim proceeds from the liquidation of the collateral to settle the liability or obligation of the obligor. S 17.7 In the event proceeds from the liquidation of the collateral are insufficient to fulfil the liability or obligation owing to the pledgee, the balance shall remain as a liability or obligation of the obligor. G 17.8 In relation to paragraph 17.7, the pledgee may either demand the balance from the obligor or waive his right to claim such balance. S 17.9 In the event that proceeds from the liquidation of the collateral exceed the liability or obligation of the obligor, the excess amount shall be returned to the owner of the asset. G 17.10 If there is more than one form of collateral, the pledgee may stipulate any of the collaterals to be liquidated to settle the liability or obligation of the obligor. G 17.11 In the event the collateral is in the form of money, the pledgee may directly claim the amount of the liability or obligation owed by the obligor from the collateral. APPLICATION OF RAHN WITH OTHER CONTRACTS 18 Application of rahn in qard G 18.1 A rahn contract may be arranged with qard contract. S 18.2 The collateral shall be liquidated to recover payment of the outstanding debt amount arising from the qard in accordance with the terms and conditions agreed between the contracting parties. 19 Arrangement of rahn in murabahah, tawarruq and bai` `inah G 19.1 A rahn contract may be arranged with murabahah, tawarruq or bai` `inah contract. S 19.2 The collateral shall be liquidated to recover payment of any outstanding debt amount arising from the murabahah, tawarruq or bai` `inah contract. G 19.3 In connection to paragraph 19.2, the contracting parties may agree to include a claim on any expenses directly related to the recovery of the outstanding debt payment from the collateral. 20 Arrangement of rahn in istisna` G 20.1 A rahn contract may be arranged with an istisna` contract. S 20.2 The collateral shall be liquidated to– (a) recover payment of any outstanding debt amount owed by the
7. Rahn 10 of 27 (b) G purchaser; or guarantee debt liability borne by the seller arising from the failure to deliver the istisna` asset. 20.3 In connection to paragraph 20.2, the contracting parties may agree to include a claim on any expenses directly related to the recovery of the outstanding debt payment from the collateral. 21 Arrangement of rahn in ijarah G 21.1 A rahn contract may be arranged with ijarah contract. G 21.2 The contracting parties may agree to liquidate the asset for any or a combination of the following: (a) overdue rental; (b) any expenses directly related to the recovery of the overdue rental; or (c) any other amount due arising from the lessee’s misconduct or negligence or breach of specified terms. 22 Arrangement of rahn in kafalah G 22.1 In a kafalah contract with recourse, the guarantor may request the guaranteed party to place an asset as collateral upon entering into the kafalah contract. G 22.2 In relation to paragraph 22.1, if the guaranteed party fails to settle the recourse amount within the agreed period, the guarantor may liquidate the collateral to settle the debt due. 23 Arrangement of rahn in mudarabah, musyarakah, or wakalah bi alistithmar S 23.1 A rahn contract shall not be arranged in a mudarabah, musyarakah, or wakalah bi al-istithmar contract to guarantee the capital or profit. S 23.2 Notwithstanding paragraph 23.1, if– (a) the rabbul mal (capital provider) takes collateral from the mudarib (entrepreneur) in mudarabah; (b) any partner is required to provide collateral in musyarakah; or (c) the muwakkil takes collateral from the wakil (agent), the collateral can only be liquidated in the event of losses due to misconduct, negligence or breach of specified terms of contract by the mudarib, partner(s) or wakil. 24 Arrangement of rahn in wa`d G 24.1 A rahn contract may be arranged with a wa`d contract. G 24.2 The pledgor may promise the pledgee to pledge the collateral in the future.
8. Rahn 11 of 27 25 Arrangement of rahn with takaful G 25 .1 Takaful coverage may be arranged in a rahn contract to provide takaful coverage on the asset in relation to– (a) maintenance; or (b) safekeeping. S 25.2 In relation to paragraph 25.1, unless otherwise agreed by the contracting parties, the takaful contribution for– (a) maintenance of asset must be borne by owner; and (b) safekeeping of asset must be borne by pledgor. DISSOLUTION (FASAKH) AND COMPLETION (INTIHA’) OF THE RAHN CONTRACT 26 Dissolution of rahn S 26.1 The rahn contract shall dissolve under any of the following circumstances: (a) destruction of collateral caused by force majeure or by actions other than misconduct, negligence or breach of specified terms; (b) termination of the rahn contract by the pledgee; (c) termination or mutual cancellation (iqalah) of the contract that the collateral is pledged to; or (d) disposal of collateral by the owner with the consent of the pledgee, resulting in the transfer of ownership of the collateral through contracts such as sale, hibah and waqf. S 26.2 Notwithstanding paragraphs 26.1(a) and 26.1(d), the rahn contract shall not dissolve if there is a prior agreement between the contracting parties to repair or substitute the destroyed or disposed collateral, as the case may be. S 26.3 Dissolution of rahn contract does not dissolve the liability or obligation of the obligor owing to the pledgee. S 26.4 In the event that there is demise, dissolution or loss of legal capacity of either contracting party as the case may be– (a) the rahn contract shall not dissolve; and (b) the legal heirs or successors shall assume the rights and obligations of the contracting party that has demised, dissolved or lost the legal capacity. 27 Completion of rahn 27.1 The rahn contract completes under the following circumstances: (a) settlement of the liability or obligation owed to the pledgee by the obligor, his guarantor or through the transfer of such liability or obligation to a third party (hiwalah al-dayn); (b) set-off (muqassah) of full debt obligations between the obligor and the S
9. Rahn 12 of 27 (c) (d) pledgee; liquidation of collateral to discharge the liability or obligation of the obligor; or waiving of right (ibra’) by pledgee to claim the whole liability or obligation from the obligor. S 27.2 In the event that the rahn contract has completed under paragraphs 27.1(a), 27.1(b) or 27.1(d), the pledgee shall return the collateral in his possession to the owner. S 27.3 Upon the completion of the rahn contract, the contracting parties shall be absolved from further contractual obligations.