Author
Associate Professor, Islamic Finance Department, Islamic Studies and Management Faculty, Imam Sadiq University, Tehran, Iran
Abstract
Introduction and Objectives
One of the types of Islamic financial instruments is when the basic contract is not a simple type of contract; Rather, it is a combination of contracts. The expansion and complexity of financial markets have doubled the necessity of designing and developing new financial instruments based on a combination of contracts. Today, combining contracts is a potential mechanism to design and develop Islamic financial products and services. Shari'ah originally does not prohibit combining multiple contracts in one transaction, as long as it does not contradict Sharia principles and standards. The logic of the combination of contracts should be such that it is not subject to the prohibited rules of Sharia such as the prohibition of riba, gharar, gambling, etc., in situations where the combination of contracts is in conflict with an explicit Shariah rule, or is to circumvent illegal transactions, or contains contradictions in contracts, or is a justification for carrying out a usurious transaction, this type of transaction is invalid and forbidden. This research aims to identify various examples of the combination of contracts in Islamic financial instruments issued in the capital market of Iran, then analyze them from a Shariah point of view, emphasizing the resolutions of the Shariah Committee of Iran Securities and Exchange Organization. The final goal of this research is to provide guidelines for combining contracts to design innovative Islamic financial instruments.
Method
This study is qualitative research that is practical from the point of view of the goal and descriptive and analytical from the point of view of data collection. In this research, at first, shariah texts and related research and international standards were examined and studied and shariah criteria and rules for the combination of contracts were extracted. Then, examples of combining contracts in Islamic financial instruments issued in the Iranian capital market were identified. Finally, according to the Shariah rules and criteria, the Shariah issues in the combined contracts were analyzed with emphasis on the approvals of the Shariah committee of the Iran Stock Exchange Organization.
Results
In a wide range of Islamic financial instruments issued in the Iranian capital market, hybrid contracts have been used. The combined contracts used and related Shariah issues are presented in Table 1.
Table 1. The combined contracts, Shariah Issues, and Resolutions
Types of Combined Contracts
Cases
Shariah Issues
1. Combining Musharakah, Mudarabah, and Wakalah with a guarantee contract.
Musharakah, Mudarabah, and Wakalah Sukuk
A condition contrary to the requirements of the original contract
2. Combining the main contract with the embedded option
2.1. The combination of the main contract with the Put and call option
Salam/Salaf, Wakalah, Mnfaah, and Ijarah, and Musharakah Sukuk
1. Bai-al-inah in Slaf/Salam and Ijarah Sukuk
2. Formalization of the contract in Salam/Salaf, Manfaah, Musharakah Sukuk.
3. Ambiguous condition and
Suspicion of gharar in Manfaah Sukuk.
4. Failure to respect the principal's (Muwakkil) interests.
2.2. The combination of the main contract with convert/exchange option
Ijarah, Murabahah, Istisna, and Musharakah Sukuk
Ambiguous condition and Suspicion of gharar
2.3. The Combination of the main contract with repurchase option
Murabahah, Ijarah, Istisna, Musharakah, Mudarabah and Reinsurance Sukuk
1. Suspicion of gharar in Murabahah, Ijarah, Istisna, Musharakah, and Mudarabah
2. Formalization of the contract in Musharakah and Reinsurance Sukuk
3. Prohibition of selling debt to the debtor in Murabahah Sukuk
3. Combining Salaf/Salam contract with Hawalah contract/ Wakalah for sale
Salam/Salaf Sukuk
1. the prohibition of selling Salam commodity before maturity,
2. Suspicion of Bai-al-inah
3. Failure to respect the principal's (Muwakkil) interests
4. Betting the second transaction on the first transaction
4.1 Sale and Buyback
Murabahah Sukuk
Suspicion of Bai-al-inah
4.2. Sale and lease back
Ijarah Sukuk
Suspicion of Bai-al-inah
4.2 Istisna and Murabahah/Ijarah
Istisna Sukuk
Suspicion of Bai-al-inah
Discussion and Conclusions
In this research, practical cases of combining contracts in Islamic financial instruments of Iran's capital market were presented and analyzed from a jurisprudential point of view. These cases include combining Musharakah, Mudarabah, and Wakalah with a guarantee contract, combining Salam-Hawalah/ Salam-Wakalah on sale, attaching embedded put and cal /convert/ exchange/repurchase option to the main contract, and conditionalizing the second transaction on the first transaction. According to the presented analysis, all cases have Shariah doubts and Shariah solutions have been provided for each. Also, the approvals of the Sharia committee of SEO of Iran regarding each type of contract combination (if any) have been presented and analyzed.
In future research, it is suggested to analyze the jurisprudential bases of the Shariah committee's approvals of Iran SEO corresponding to each of the mentioned cases. Also, examining the application of the combination of contracts in the financial markets of other Islamic countries can have beneficial results for the financial markets of Iran.
Acknowledgement
The cooperation of the research, development, and Islamic studies management of Iran Securities and Exchange Organization in writing this research is gratefully acknowledged.
Keywords
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