Publication:
Bilateral rebate (ibra' mutabadal) in Islamic banking operation: a critical appraisal
Abstract
This study aims to examine the scholars' views on the legality of bilateral rebate in Islamic financial transactions. It also aims to evaluate the contemporary application of bilateral rebate in Islamic banking operation as an alternative to the conventional mechanism in handling the events of early settlement of debt, early termination of debt facility and early withdrawal of term deposit. The study used deductive and inductive methods to analyze the juristic literature of all the major schools of law on the legality of both bilateral and unilateral rebate in a financial transaction. The study found bilateral rebate (ibra' mutabadal), instead of unilateral rebate, to be the best and fairest Islamic mechanism to overcome injustice in several events that may impact the bank's liquidity such as that of early settlement of debt facility and early withdrawal of term deposit in the sense that the interest (maslahah) of both transacting parties is equally secured.
Keywords
Liquidity management , Bilateral rebate , Islamic banking operation , Unilateral rebate
Citation
Abdul Khir, M. F. (2016). Bilateral rebate (ibra' mutabadal) in Islamic banking operation: a critical appraisal. International Journal of Islamic and Middle Eastern Finance and Management, 9(3), pp. 435-452.
Publisher
Emerald Publishing Limited