Abstract

This paper provides a detailed explanation about the contract of qard (loan) as approved by Sharī‘ah and analyses how it is applied in the contemporary Islamic finance industry. With regard to research mentod, it examines various Islamic banking and finance products structured on the principle of qard contracts and discusses the possible risks of non-Sharī‘ah compliance in their structuring, and how they can be addressed and resolved. The main finding is that the issue of profiting from qard hasan contracts is very sensitive and many institutions are possibly compromising on Sharī‘ah compliance through use of service charges and customary hibah-giving, etc. It is significant and attracts the attention of Islamic financial institutions to re-visit their products structured on qard hasan contracts. In general, it outlines the features of qard hasan contract and its application for benefit of the practitioners of Islamic banking all over the world.

Keywords

Qard Hasan; Hibah; Service Charge; Islamic Finance; Sharī‘ah Compliance.