Exploring Alternative To Bay’ Al-Dayn Contract In Islamic Banks

Muhammad Anwar Hafey Badruldin; Muhammad Syazwan Sanuri; Sharifah Faigah Syed Alwi

Authors

Muhammad Anwar Hafey Badruldin Student
Muhammad Syazwan Sanuri Officer
Sharifah Faigah Syed Alwi Professor

Keywords:

Bay’ al-Dayn, Islamic Banking, Muslim Scholars, Application, Alternative

Abstract

Global use of bay’ al-dayn in the Gulf Cooperation Council and Middle East is limited due to concerns about Shariah compliance, specifically its permissibility. Acceptance and rejection of scholars on bay’ al-dayn have created confusion, hindering Malaysian banking products in international markets. Despite 15 years of discussions, Malaysia’s Islamic finance industry has not made substantial changes. Bay’ al-Dayn offers a debt-securitization option in conventional trade financing adhering to Shariah principles. This research intends to compare the opinions of Muslim scholars and Islamic bank practitioners on the ruling of bay’ al-dayn in Islamic banks. The second objective is to examine the application of bay’ al-dayn to Islamic banking products. The third objective is to investigate alternatives to bay’ al-dayn practiced by Islamic banks. This research uses a qualitative approach, collecting data from Quranic texts, Hadith, related journal articles, and heritage books. Interviews with practitioners from Islamic banks provide practical insights. This study concludes that Shariah compliance, rather than operational issues, is the primary reason for Islamic banks’ reluctance to embrace bay’ al-dayn, driven in part by the desire to access international markets. As alternatives, bay’ al-dayn bi al-sila’ and tawarruq are considered suitable replacements. To enhance understanding and innovation in the Islamic banking industry, this research recommends expanding the sample size to study banks rejecting bay’ al-dayn and exploring the potential use of bay’ al-dayn bi al-sila’ in non-banking institutions. These steps could help address the challenges posed by bay’ al-dayn and its alternatives while meeting the diverse needs of Islamic finance.

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Author Biographies

Muhammad Anwar Hafey Badruldin, Student

Arshad Ayub Graduate Business School, Universiti Teknologi MARA, 40450 Shah Alam.

Muhammad Syazwan Sanuri, Officer

Bank Pertanian Malaysia Berhad (Agrobank)

Sharifah Faigah Syed Alwi, Professor

Arshad Ayub Graduate Business School, Universiti Teknologi MARA, 40450 Shah Alam

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