Ujr Dhaman

Ujr Dhaman is a guarantee fee. Per se a fee for a guarantee is not permissible in Islamic law, see Kafalah. However, a number of contemporary scholars allow to charge a fee for a guarantee, if the recovery amount from the debtor is reduced by the fee. The logic argued is that in such a case no Riba occurs, because the guarantor pays off the debtor and only asks for the same amount without increment to receive back. In non-default cases, however, the guarantor retains the fee fully.