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Tawarruq time deposit with wakalah principle: an option that triggers new issues

Author

Listed:
  • Abdul Ghafar Ismail
  • Nik Abdul Rahim Nik Abdul Ghani
  • Mat Nor Mat Zain

Abstract

Purpose - This paper aims to make an attempt to analyze the adoption of wakalah in the tawarruq deposit that may trigger new issue. Design/methodology/approach - This paper provides a review on the underlying contracts for deposit-taking activities. Findings - There are two mains findings from this paper – first, the current deposit taking activities are characterized by principal guaranteed, it deems contrary to the nature of mudarabah. Second, we suggest the presence of wakalah in tawarruq term deposits and we argue that the application of the concept of bay al-wakillinafsihi would not affect the validity of wakalah. Originality/value - This paper is considered to have its own originality in the sense that the introduction of tawarruq-based deposit product by Islamic banks could be the best alternative to the current deposit products.

Suggested Citation

  • Abdul Ghafar Ismail & Nik Abdul Rahim Nik Abdul Ghani & Mat Nor Mat Zain, 2016. "Tawarruq time deposit with wakalah principle: an option that triggers new issues," International Journal of Islamic and Middle Eastern Finance and Management, Emerald Group Publishing Limited, vol. 9(3), pages 388-396, August.
    • Handle: RePEc:eme:imefmp:v:9:y:2016:i:3:p:388-396
    DOI: 10.1108/IMEFM-05-2014-0048
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    More about this item

    Keywords

    Banking services; Guarantee; Tawarruq; Islamic bank; G23; G28; N15;
    All these keywords.

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • N15 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Asia including Middle East

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