Kafalah

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(Ar. كفالة) Arabic term for guarantee.

Kafalah bi al-mal could be divided into: Kafalah bi al-dayn, is a guarantee for a debt owed by a party, Kafalah bi al-`ayn, is a guarantee for a tangible property or for the delivery of an object of a contract, Kafalah Al Darak, is a guarantee for a property that is free from any encumbrance or claim.

Kafalah belongs to the charitable contracts, for which no compensation is foreseen in classical Fiqh.

Banks can charge for Kafalah bi al-dayn an administration fee unrelated to time and credit risk, and hence only issue a Kafalah if they are fully collaterialised, e.g. in international trade. Some scholars do allow a compensation according to the concept of Ujr Dhaman.

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