Amanah and Wakala in Islamic Banking (Complete Guide)
- To give any commodity / asset to anybody for the sake of safety is called Amanah.
- Anything given as Amanah is considered to be something held in trust, and the same can not be used.
USE OF AMANAH IN ISLAMIC BANKING
- Certain people consider current accounts as Amanah, however, now these are generally obtained under a Qard agreement.
- Security deposits however, are a kind of Amanah. Similarly, moneys, valuables and other assets held in lockers for safe custody are considered Amanah.
- Wakala is the act of one party delegating the other to act on its behalf, in what can be a subject matter of delegation.
- Wakala is basically non-binding contract for both the parties. However, it may some times become a binding contract.
BASIC ELEMENTS OF WAKALA
The basic element of Wakala are:
- Subject Matters of Wakala
- And Parties.
TYPES OF WAKALA CONTRACT
REMUNERATION IN WAKALA CONTRACT
When Wakala is remunerative, it falls under the Shariah rulings on Ijarah (Service Ijarah or Ujrah).
The amount payable as remuneration for Wakala, should be know in lump-sum.
Wakala is different from Juala……. In other words, the objective and the remuneration should be clear.
Gharar should be avoided in the Wakala contract.
PURPOSES OF WAKALA
There are two purposes of Wakala:
- For business purpose (Wakalatul-Istismar); and
- For general purpose other than business
DIFFERENCE B/W WAKALAT UL ISTISMAR AND MODARABA
There are two major differences:
- Wakeel entitles its fixed remuneration, although the business is in loss. While the Modarib is not entitled its share of profit in case of loss (except for the view of certain jurists that even in this case, he should be given some remuneration).
- The rules of Ijarah apply in Wakala contract while the rules of Modaraba apply in Modaraba contract.
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