IsWa’danany different toMuwa’adah? Empirical evidence from Malaysia

Purpose - – The study aims to considerwa’dan-based products in Islamic banks in Malaysia and discuss the validity ofwa’danin those products from the perspective of Shari’ah. Design/methodology/approach - – Case studies were conducted of three Islamic banks in Malaysia. Semi-structured interviews were carried out with bankers as well as Shari’ah scholars. The document analysis method was adopted to strengthen the findings. Findings - – The study shows that three Islamic banking products:Musyarakah Mutanaqisah(MM) home and property financing;Al-Ijarah Thumma Al-Bai’(AITAB) vehicle financing; andIjarahrental swap (IRS) usewa’danin their product structures. After discussing the different views of the scholars, the study concludes thatwa’danshould be allowed in the above-mentioned products because it is different frommuwa’adah. Inwa’dan, every single wa’d is separate from each other, as every one of them is related to different types of events. With regard to the issue ofShari’ahin MM home and property financing, it was concluded that wa’d from the customer to purchase the bank’s share is not a capital guarantee. Moreover, IRS is not a form of gambling but is in line with Maqasid al-Shari’ah. Research limitations/implications - – The study is limited to three Islamic banks in Malaysia that focus on retail and commercial banking products. Therefore, the study excludes application ofwa’danin sukuk and some other Islamic derivatives that are not the practice of these three banks. Originality/value - – This empirical study adds new knowledge by developing the concept and practice ofwa’dan.Wa’danas an innovative tool for product development to overcomeShari’ahissues in conventional banking may be of interest to practitioners all around the world.