Ibra
Ibra in Islamic Law means to free from responsibility. It is an act by a person to withdraw his rights, ie, his rights to collect payment from a person who has the obligation to repay the amount borrowed from him.
One of its special meanings is in financial agreements.Ibra in a financing agreement is named the concept of giving a rebate to a customer in case of early settlement.
In Islamic law a contract shall have a fixed price in advance and not different prices attached to it. This condition is argued with the prohibition of uncertainty (Gharar). Therefore many Sharia Boards have ruled that a financier can give a rebate at his discretion but not binding on him in advance.
The Shariah Advisory Council, Central Bank of Malaysia, accepts an unilateral promise of the financier, whereby the institution promises the rebate and the potential mechanism of calculation, hence transparency and legal security for the client is enhanced for this purpose. The permission for doing so is justified by the concept of public good (Maslaha and the principle of dha wa taajjal).
References
- Taqi Usmani, Introduction to Islamic Finance PDF eBook
- The Chancellor Guide to the Legal Shari'a Aspects of Islamic Finance, edited by Dr Humayon Dar, Umar Moghul , 2009.
- Resolution Shariah Advisory Council, Central Bank of Malaysia, regarding early settlement (Ibra)
- Resolution Shariah Advisory Council, Central Bank of Malaysia regarding Ibra in variable rate financing contracts
