In the Name of Allāh,

the Entirely Merciful, the Especially Merciful

Praise is due to Allāh, Lord of the worlds, may the blessings and peace be upon our master Muḥammad, the last of prophets, on his family, and all his companions.

Resolution No. 101 (4/11)

Debt Sale, Loan Debentures, and their Shariah-based Alternatives in the Public and Private Sectors

The Council of the International Islamic Fiqh Academy of the Organization of the Islamic Conference, holding its 11th session in Manama, Kingdom of Bahrain, on 25–30 Rajab 1419h (14–19 November 1998),

Having examined the research papers submitted to the Academy concern- ing Debt Sale and Loan Debentures and their Shariah-based Alternatives in the Public and Private Sectors,

In light of the discussions highlighting the importance of these issues in contemporary financial transactions,

Resolves

First: It is not permissible to sell a deferred debt by the non-debtor for imme- diate cash, of its type or otherwise, because this results in ribā (usury). Likewise, it is not permissible to sell it for a deferred cash, of its type or otherwise, because it is similar to selling a debt for a debt, which is prohibited in Shariah, regardless of whether the debt is the result of a loan or a deferred sale.

Second: Emphasizing the Academy resolution no. 60 (11/6) concerning Bonds, issued at its sixth session held in Saudi Arabia on 17–23 Shaʿbān 1410h (14–20 March 1990) and paragraph (3) of the Academy resolution no. 64 (2/7) regard- ing discounting commercial papers, issued at its seventh session held in Saudi Arabia on 7–12 Dhū al-Qi’dah 1412h (9–14 May 1992).

Third: The Academy reviewed other forms of the debt sale and decided to postpone the issuance of resolutions on the subject to conduct further research. It, therefore, requests the Secretariat General to establish a committee to study these forms and suggest Shariah-compliant alternatives to debt sale, to be sub- mitted at the next session of the Academy.

Indeed, Allāh is All-Knowing.