Practical application of kafalah in Islamic banking in Malaysia

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The purpose of this paper is to explore the application of kafalah in the practice of Islamic banking in Malaysia generally and ascertain applicable rules governing the application under relevant legislations and Shariah. The study also aims to examine the legislations in the light of Shariah provisions governing kafalah and propose amendments. This is a qualitative research where primary data sources mainly legislations and secondary sources comprising of articles and books on the subject of kafalah were examined. It is an exploratory legal research that primarily focuses on library studies and adopts doctrinal approach for content analysis of data from the identified sources. Kafalah is widely used in Islamic banking in Malaysia with primary or secondary application in structuring such products/services as personal guarantee, bank guarantee, Islamic credit card among others. The substantive law applicable to kafalah in Islamic banking in Malaysia is the Contracts Act 1950 as decided cases indicate. However, provisions of the Act are at variance with rules of Shariah applicable to kafalah on absolution of guaranteed debtor, multiple guarantors' liability towards guaranteed sum as well as recourse and recovery from principal debtor.
Application , Islamic banking , Kafalah , Malaysia , Guarantee
Muneeza, Aishath and Mustapha, Zakariya. (2020). Practical application of kafalah in Islamic banking in Malaysia. PSU Research Review.
Emerald Publishing Limited

Publication status: Published online on 21 February 2020. Full text not available from this repository.

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