---
title: "What is Muqassah (set-off)? | IslamicOpenFinance™"
description: "Extinguishing a debt owed to a party by a debt that party owes, either by operation of law or by agreement."
url: https://islamicopenfinance.com/glossary/muqassah/
lang: en-GB
source: "IslamicOpenFinance"
---

[Glossary](https://islamicopenfinance.com/glossary/) / [Treasury, liquidity and hedging](https://islamicopenfinance.com/glossary/#treasury)

Treasury, liquidity and hedging

# Muqassah (set-off)

Extinguishing a debt owed to a party by a debt that party owes, either by operation of law or by agreement.

Muqassah is set-off: extinguishing a debt receivable by a debt payable between the same parties. AAOIFI's standard on settlement of debts by set-off divides it into mandatory set-off, which takes effect without both parties' agreement where its conditions are met, and contractual set-off, which the parties agree. Set-off is common in treasury and trade settlement, so systems that net obligations need to know which debts can lawfully be offset, in which currency, and whether netting would amount to exchanging debt for debt in a way the standards do not allow.

## Sources

- [AAOIFI Shari'ah Standards, English edition (full text, PDF): Shari'ah Standard No. 4, Settlement of Debts by Set-Off, item 2](https://aaoifi.com/wp-content/uploads/2017/12/Shariaa-Standards-ENG.pdf)

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

[**Hawalah** Transfer of a debt: the obligation to pay moves from the original debtor to another party who accepts it.](https://islamicopenfinance.com/glossary/hawalah/) [**Bay al-sarf (currency exchange)** An exchange of money for money, of the same or a different currency, which must be settled on the spot.](https://islamicopenfinance.com/glossary/bay-al-sarf/) [**Sell and buy back (SBBA)** An interbank arrangement of an outright sale of securities, promises to reverse it and a later outright sale back at a set price.](https://islamicopenfinance.com/glossary/sell-and-buy-back/) [**Dhimmah (legal capacity for obligations)** The legal capacity in which rights and obligations are held, so that a debt can sit in a person's liability rather than in a specific asset.](https://islamicopenfinance.com/glossary/dhimmah/)

**Treasury, liquidity and hedging**

1. [Commodity murabaha](https://islamicopenfinance.com/glossary/commodity-murabaha/)
2. [Wa'd (promise)](https://islamicopenfinance.com/glossary/wad/)
3. [Muwaadah (mutual promise)](https://islamicopenfinance.com/glossary/muwaadah/)
4. [Tahawwut (hedging)](https://islamicopenfinance.com/glossary/tahawwut/)
5. [Islamic profit rate swap](https://islamicopenfinance.com/glossary/profit-rate-swap/)
6. [Islamic FX forward](https://islamicopenfinance.com/glossary/islamic-fx-forward/)
7. [Islamic cross-currency swap](https://islamicopenfinance.com/glossary/islamic-cross-currency-swap/)
8. [Interbank investment wakalah](https://islamicopenfinance.com/glossary/interbank-investment-wakalah/)

[All 221 terms](https://islamicopenfinance.com/glossary/)