Principles of Wa’d and Muwa'adah : their application in Islamic financial contracts

الملخص EN

The application of unilateral promise (waÑd) in certain Islamic financial products, although recent, has witnessed spectacular development.

It has been widely applied in products such as murÉbaÍah for a purchase orderer (murÉbaÍah lil Émir bi al-shirÉ’), leasing ending with ownership (ijÉrah muntahiyah bi al-tamlÊk), Islamic hire-purchase (ijÉrah thumma al-bayÑ), diminishing partnership (mushÉrakah mutanÉqiÎah), Îukuk structures and treasury products such as FX-i forward Islamic profit rate swaps.

Some of the abovementioned structures employ only one-way waÑd while others use two-way waÑd.

Thus, it is important to examine principles of both unilateral promise (waÑd) and bilateral promise (muwÉÑadah) in order to identify whether structures that utilise two-way waÑd comply with the rules of waÑd or whether they resemble the features of muwÉÑadah.

WaÑd, which is translated as ‘a promise’, originates from the Arabic root word of ‘waÑada’,1 which connotes both good and bad meanings.

The verbal noun waÑd is used for promises to do good or bad, whereas the term waÑÊd is reserved for a promise to inflict harm only (al-Asfahani, 1412H).2 In the Qur’Én, Allah has used waÑd for both good and bad meanings, as He says: “It was Allah Who gave you a promise of Truth” (SËrah IbrÉhÊm 14: 22); “Yet they ask thee to hasten on the Punishment! But Allah will not fail in His Promise”