Sale-based contracts

Bay al-dayn (sale of debt)

Selling a debt created by a sale or lease to a third party; standard setters set different limits on it.

Bay al-dayn is the sale of a debt, such as a receivable created by a murabaha, deferred sale, ijarah or istisna, to someone other than the debtor. Bank Negara Malaysia's compilation of Shariah resolutions describes it as a method of selling debt created under exchange contracts, and its resolutions require the debt to be established and fixed before it is traded, rejecting the sale of an expected debt from a service. AAOIFI's standards are more restrictive: its sukuk standard does not permit trading certificates that represent a monetary debt, such as murabaha certificates after delivery, and subjects others to the rules on disposal of debts. Debt sales therefore need the governing authority identified first.

Sources

This entry explains a term; it is not a Shariah ruling. Approving a product is for each institution's own Shariah board and regulator.

Related terms

MurabahaA sale at cost plus an agreed, disclosed profit; the seller must own the asset first. Payment is often deferred in instalments.Tradability of sukukWhether sukuk may be sold on, which depends on what they represent: assets and usufruct, or debts and cash.Sukuk al-murabahaCertificates that finance goods bought for sale by murabaha; once the goods are delivered, they represent a debt.HawalahTransfer of a debt: the obligation to pay moves from the original debtor to another party who accepts it.RibaAn increase over principal that Shariah prohibits: extra stipulated on a loan, or an unequal exchange of certain like-for-like goods.