Permissibility of Hawalah 

The contract of Hawalah derives its permissibility from the Qur`an, the Sunnah, Ijma’ (consensus of Fuqaha) and reasoning. Abu Hurayrah (may Allah be pleased with him) narrated that the Prophet (peace be upon him) said: “Default on payment by a solvent debtor is unjust, and if anyone of you is transferred to a solvent person, he must accept the transfer.” In another text of the Hadith, related by Ahmad and Al-Bayhaqi, the Prophet (peace be upon him) said: “If one is referred to a solvent person for the recovery of his right, such a person must accept the transfer”. The Prophet’s order that the creditor must accept the transfer means transfer of debt is legal, otherwise he would not give that order.

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