Debt Sale - Türkiye Katılım Bankaları Birliği

Debt Sale
(From viewpoint of Fiqh Schools)
By Dr. Seyyed Abbas Musavian
Secretary of Shariah Board
Securities and Exchange Organization
Today the Sale of debt contract (Bay’ Al-Dain) has widespread
applications in money and capital market including:
– Financing working capital of corporations through discounting commercial
– Providing credits in current accounts through discounting commercial documents
by commercial banks
– Increasing credit base of banks through rediscounting commercial documents by
Central Bank
– Banks liquidity management through discounting commercial documents between
– Issuing Islamic securities (Sukuk) such as Murabahah, Istisna’, Jo’alah, etc, which
secondary market is pending for allowance of selling and buying obligation.
• This contract has been a subject of debates and arguments among
Shia and Sunni scholars.
• Here I want to explain viewpoints of quintuple Fiqh schools about
sale of debt.
Vocabulary Definition of Dain (Debt)
According to some Arab philologists, the word “Dain” means everything which
currently is not present.
Some others define it as “Qard” (borrowing and lending)
In some Fiqh texts, the word is defined as “affirmation of a right against the other
Abi Hilal Askari in “Al-Forouq ul-Loqavyyah” takes Dain as more general than Qard
and points out two aspects in its definition:
– Firstly, in credit sale, the price is called Dain not Qard;
– Secondly, in Qard, the substitute should be the same as what is borrowed, but in Dain it is not
Terminology of Dayn
Fiqh scholars use “Dayn” in two meaning:
• 1. Dayn in more general meaning
– Everything which is imposed as an obligation including Allah’s right or Ibad’s right (the
right of those devoted to Allah)
– By “Allah’s right” it is meant any religious practice for which a Muslim is charged such as
prayer, fasting, Al-Hajj, etc.
– “Ibad’s right” is those obligations which are imposed on persons whether as a result of
Qard, or an exchange, or damaging others’ properties.
– According to this meaning, what is proved as an obligation is not required to be property
and non-financial affairs can also be considered as “Dayn”.
Terminology of Dayn (Con ’d)
• 2. Dayn in more particular meaning
– There is a controversy among Fiqh scholars about Dayn in more particular
– According to Hanafiyeh, Dayn is an obligation which is imposed as a result of
exchange, Qard or damaging others’ properties.
– Dominant Fiqh scholars in both Shia and Sunni schools have extended the
reasons of affirmation of debt. According to them, Dayn is that property which
is imposed on a person’s obligation, no matter what its cause is; whether
common obligations among people which cause is Qard or exchange or
damaging, or Allah’s rights such as Zakat and Khoms.
Kinds of Dayn
a) Classifying Dayn according to the time of its fulfillment
a.1) Present Dayn
It is a kind of debt that no date is set for its fulfillment. So it is possible for creditor to charge
the debtor at any time and it is necessary for debtor to fulfill the debt on demand.
This kind of debt is also called “hurried debt” (Dian Mu]ajjal) and includes the substitutes in
contract of exchange, price in present sale (Bay’ Haal), and also price in advanced sale.
a.2) Deferred Dayn
It is a debt which has a specific maturity and creditor cannot charge the debt before that time
and in the case he charge the debtor, it is not necessary to service the debt.
If debtor clears the debt before maturity, his obligation had met.
Kinds of Dayn
b) Classifying Dayn according to its confirmation on obligation
– b.1) Confirmed Debt (Dayn Mustaqar)
It is a debt which possession is confirmed for creditor and it is necessary for
debtor to service it.
This kind includes: the substitute of borrowed property, price of usurped
property, price of object of sale (Mabi’), worker’s wage after finishing the
work, etc.
– b.2) Unconfirmed debt
It is a debt which still is not confirmed against debtor such as the wage before
doing the work, marriage gift before penetration.
Related Concepts
Sale (Bay’)
• Sale is “exchange of one property with another”. In this exchange, one
property is “price” (Thaman) and another is “sale object” (Muthman).
Therefor in realizing sale, the substitutes should be property and if one of
them lacks this trait, sale is not realized. Accordingly, there has been many
debates among Fiqh scholars concerning whether “debt” is a property or
Is debt a property?
• Fiqh scholars have classified property into numerous kinds; the property
may be a physical good or a benefit or a right. Physical good may be
specific or general.
• By general physical good We mean a commodity which has no external
existence but just an obligation on a person. According to Fiqh scholars,
one example of general physical good is “general on obligation” (Kulli fi
Dhimmah) which is debt.
• In conclusion, debt is a property and sale of debt is not prohibited.
The Conception of debt sale
According to what has said before, the conception of debt sale is that one of the
two properties in sale of debt contract, is general (Kulli) and on obligation.
Precise Definition: the creditor sales a property which is on obligation of debtor
to the debtor or any other person. In this contract, the “debt” which is on
obligation of debtor, is object of sale (Mabi’) and what is paid for it, is the price.
Sometimes the price is also debt; in such a case, the contract is called “exchange of
debt with debt” (Bay’ Dayn bi-Dayn). For example, two creditors exchange the
debt that each of them has on obligation of the other. This kind of debt sale is
invalid according to all of Fiqh schools.
Different forms of debt sale
Sale of date contract can have different forms because the debt is either
present or deferred. In addition, its price is either physical good or debt. In
some situations if both price and the object of sale are debt, it will result into
exchange of debt with debt. Details of each form will be discussed later.
It is worth to note that Fiqh scholars discuss debt sale contract in two parts:
selling the debt to the debtor himself and selling it to someone other than
him. As the judgment on each of these forms is different, we divide our
discussion into two parts and survey different forms and their judgments with
respect to these two parts.
Viewpoint of Fiqh Schools
All of Shia and Sunni Fiqh scholars do not validate sale of debt which is as a result of
“advanced sale”, before maturity whether to debtor himself or any other person, and
whether on present price or on deferred price.
Viewpoints about sale of debt which is caused by something other than advanced sale, are as
a. Sale of debt (not caused by advanced sale) to the debtor
1. If price is deferred, the sale of present or deferred debt to debtor is not validated by most
of Shia scholars and all of Sunni scholars because it is a kind of exchange of debt with debt.
2. If price is present, the sale of present or deferred debt to debtor is validated by all of Shia
scholars and is dominant among Sunni scholars because it is a kind of sale and there is no
restriction on it.
Viewpoint of Fiqh Schools
b. Sale of debt (not caused by advanced sale) to someone other than debtor
1. If price is deferred, the sale of present or deferred debt to someone other than debtor is not
validated by most of Shia scholars and all of Sunni scholars because it is a kind of exchange of debt
with debt.
2. If price is present, the sale of present or deferred debt to someone other than debtor is too
controversial and there are some different viewpoints:
2.1. Hanafiyah, Hanabelah, some of Shafe’iyah and some of Shia scholars do not validate it.
Of course Hanafiyah validate it in three cases:
a. If buyer is appointed by seller (creditor) to take the debt from debtor. (Wakalah)
b. If buyer is drawn by seller (creditor) to debtor. (Hawalah)
c. If the seller make a will to give the debt to buyer after his death. (Wasiyyah)
Viewpoint of Fiqh Schools
2.2. Dominant of Shia, some other of Shafe’iyah, Ibn
Taymiyah and Ibn Qayyem have validate it.
2.3. The rest of Shafe’iyah validate it provided that:
• a. Debtor is wealthy and confess to have such a debt or
his debt is proved by evidence.
• b. Debt is confirmed (Mustaqar)
• c. The substitute is delivered at the session of contract.
Viewpoint of Fiqh Schools
2.4. Malikiah validates it if this eight condition is met:
• a. debt be of issues which sale before delivery is permitted, such as Qard
and not food.
• b. the price should be received because otherwise it become exchange of
debt with debt.
• c. the price not to be of the same genus of debt and in the case of
similarity in genus, their amount should be equal.
• d. if the debt is gold, the price should not be silver and vice versa because
in such a case, delivery in session of contract is necessary.
• e. debtor be present in the city in which debt sale takes place; this is
because to get informed about his poverty or affluence as well as his
hardship or ease.
• f. debtor confess to his debt
• g. there has been no enmity between buyer and debtor
• h. debtor be Mukallaf (be charged with Islamic duties)
Concluding viewpoints of Fiqh schools
1. Selling deferred debt to debtor at deferred price is not validated.
2. Selling deferred debt to debtor at present price is validated.
3. Selling deferred debt to someone other than debtor at deferred
price is not validated.
4. Selling deferred debt to someone other than debtor at present price
is controversial as follows:
a. dominant Shia: validated
b. dominant Shafe’iyah: validated
c. Malikiyah: validated under some conditions
d. Hanafiyah: validated in three forms of Wakalah, Hawalah and
e. Hanbaliyah: not validated
Thank you for your kind attention