Kafalah
A guarantee: a guarantor joins the guaranteed party in assuming a specified liability.
Kafalah is a contract of guarantee. The IFSB defines it as a contract in which the guarantor conjoins the guaranteed party in assuming the latter's specified liability. It underpins Islamic bank guarantees and letters of guarantee, and because classical scholarship treats a guarantee as a gratuitous contract, debate centres on whether and how a guarantor may charge for it.
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
HawalahTransfer of a debt: the obligation to pay moves from the original debtor to another party who accepts it.RahnA pledge: an asset held as collateral for a debt, which can be sold to repay it if the debtor defaults.WakalahAgency: one party appoints another to act on its behalf, with or without a fee.