BAY AL-DAYN IN MALAYSIA

Bay al-dayn is an Arabic term for “sale of debt” as originated from two words; bay’ which means sale, while dayn means debt. As far as bay al-dayn is concerned, it simply means a sale and purchase transaction of a quality debt.

The selling of debts is to avoid the occurrence of riba between two debts and also to avoid any kinds of gharar and makhatara which may arise at the level of inability of a buyer from possessing what he has bought as it is not permitted that the buyer sold before actual receipt of the purchased item.

On 21st August 1996, The Malaysian Securities Commission Shariah Advisory Council passed a resolution unanimously agreed to accept the principle of bay al-dayn as one of the concepts for developing Islamic capital market instruments. This was based on the views of some of the Islamic jurists who allowed this concept subject to certain conditions for instance there is a transparent regulatory system in the capital market to safeguard the maslahah (public interest) of the market participants.

Opinion of the past Islamic jurists

Hanafi Mazhab

The Hanafis are unanimous in not permitting bay al-dayn with reason that the debt is in the form of mal hukmi (intangible property) and the buyer takes great risk because he cannot own the item bought and the seller can not deliver the item sold.

Maliki Mazhab

The Malikis allow bay al-dayn subject to certain conditions as follows:

a) Expediting the payment;

b) Debtor present at the place of sale;

c) Debtor confirms the debt;

d) Debtor belongs to the group that is bound by law so that he is able to redeem his debt;

e) Payment is not the same type as dayn, and it fit so, and the rate should be the same to avoid riba;

f) The debt cannot be created from the sale of currency (gold and silver) to be delivered in future date;

g) The dayn should be goods that are saleable even before they are received. This is to ensure that the dayn is not of the food type which cannot be traded before qabadh occur; and

h) There should be no enmity between the buyer and seller, which can create difficulties to the debtor.

Shafi’i Mazhab

The Shafi’i allows the selling of debt to a third party if the dayn was mustaqir (guaranteed) and was sold in exchange for goods that must be delivered immediately. The debt is sold; it must be paid in cash or tangible assets as agreed.

The Securities Commission Shariah Advisory Council held that in the context of the sales of securitized debt, the characteristic of securities differentiates it from currency. It is not a legal tender and therefore, it is not bound by the conditions for exchanging of goods. It is not a ribawi item as the fifth condition set by Maliki mazhab.