KAFALAH

DEFINITION
Kafalah comes from the root word kafala ( )which
means junction joining combination responsibility
or suretyship.
Literally
Guarantee, bail, surety, responsibility, suretyship

Technically
The pledge given by the guarantor/surety (al-kafil) to a
creditor (al-makful lah) on behalf of the principal
debtor (al-makful anh) to secure that the guaranteed
(al-makful bih) i.e the debtor, will be present at a
definite place, e.g. to pay his debt, or fine, or, in the
case of retaliation, to undergo punishment.

TYPES OF AL-KAFALAH
Al-Kafalah bi al-mal ()
Guarantee to return an asset to its owner
Can be divided into three main categories:
1.

Kafalah bi al-dayn

2.

Guarantee of repayment of another partys loan obligation

Kafalah bi al-ayn/ kafalah bi al-taslim

3.

Guarantee of payment for an item or a guarantee of delivery

in a transaction

Kafalah bi al-darak

Guarantee that an asset is free from any encumbrances.

This guarantee specific for transactions that involve the
transfer of titles of rights and ensures that an asset is free
from any encumbrances

Al-Kafalah bi al-nafs ()
Guarantee to bring someone to a specific authority,
such as the judiciary
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AL-KAFALAH BI AL-MAL
Kafalah for the property can be both for the
settlement of a debt (dain) or a guarantee that a
certain specific thing (ain) would be returned.
In this case a guarantor is not freed of from
liability if the creditor or the owner of the thing
dies. The heirs of the creditor or the owner of the
thing can demand that the guarantor settle the
debt or return the thing.
For instance, the guarantor is liable to make sure
that a certain property bought by the buyer will
be returned to him. The creditor has the option of
demanding repayment from either the principal or
the guarantor.
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AL-KAFALAH BI AL-NAFS
Guarantee of Person
In Suretyship for a person the guarantor is assuming
the responsibility to make sure the presence of the
principal in a lawsuit.
This is also possible in cases where the principal
owes the creditor.
The guarantor is required only to make sure the
presence of the person.
He is not liable to settle the debt on behalf of the
principal.
If the principal dies the guarantor is not bound to pay
on his behalf. This is because the guarantee given is
for the presence of the principal and not for the
settlement of his debt.
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APPLICATION
Two ways of application of al-kafalah in Islamic
Financial Institution
When the financial institutions act as a guarantor, where
the guarantee is for its customer to a third party. Its a
recourse guarantee. AAOIFI stipulates that only recourse
could be done by a financial institution unless its
shareholders and investors have authorized to make
such benevolent donations.
Guarantee contracts

Murabaha
Ijarah
Salam
Istisna
Sharikah and Mudarabah,
Guarantee in documentary credit,
Credit card based on contract of kafalah.