Application of qalb al-dayn on debt restructuring in Islamic banking and finance /
Debt restructuring is an important element of the Islamic finance industry just like its conventional counterpart. It is used as a remedy to help a financially distressed debtor to settle his liabilities and avoid bankruptcy. On the other side, it allows the creditor to reclaim his dues as much as p...
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| Main Author: | |
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| Format: | Thesis |
| Language: | English |
| Published: |
Kuala Lumpur :
Kulliyyah of of Islamic Revealed Knowledge and Human Sciences, International Islamic University Malaysia,
2018
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| Subjects: | |
| Online Access: | Click here to view 1st 24 pages of the thesis. Members can view fulltext at the specified PCs in the library. |
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| Summary: | Debt restructuring is an important element of the Islamic finance industry just like its conventional counterpart. It is used as a remedy to help a financially distressed debtor to settle his liabilities and avoid bankruptcy. On the other side, it allows the creditor to reclaim his dues as much as possible while incurring as little loss as possible. In Islamic financial institutions, debt restructuring is mostly implemented through a concept known in fiqh as qalb al-dayn. This study examines the extent of the conformity of this concept to the Shari'ah by comparing different views of Islamic scholars and adopting a preferred view. Furthermore, this study analyzes the application of this concept on the practice of debt restructuring in Islamic banks and Islamic financial institutions (IFIs) particularly in Malaysia. In addition, this research proposes some principles for developing institutional level regulations for a Shari'ah-compliant debt restructuring mechanism. The study used the qualitative method and included an empirical analysis which involved gathering information on the practice of debt restructuring in IFIs through a survey. The study concludes that some methods of debt restructuring; namely rescheduling, debt forgiveness, haircut, debt for asset swap, and debt for equity swap are compatible with the Shari'ah. However, the methods of debt restructuring and refinancing which lead to extension of repayment period with an increase in the principle amount of debt are subject of serious Shari'ah concerns as there is prospect of the involvement of riba. The study discovers that most of the IFIs in Malaysia implement qalb al-dayn by providing new murabahah or tawarruq financing to defaulting debtors in order to enable them to settle their previous liability; a mechanism that is considered impermissible by the majority of jurists. Moreover, the research concludes that the same rules of debt restructuring that apply to a person may be applicable to limited liability corporate bodies. Finally, the researcher proposes some principles that may help to develop a centralized regulatory framework for the practice of debt restructuring in Islamic banks and IFIs. |
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| Physical Description: | xiv, 113 leaves : illustrations. ; 30cm. |
| Bibliography: | Includes bibliographical references (leaves 100-109). |