'IWAD AS A REQUIREMENT OF LAWFUL SALE: A CRITICAL ANALYSIS

This paper will argue that replacing ribOE with al-bayc does not mean that the latter can imply any form of sale (al-bayc) to justify Islamic legitimacy. Apart from the prohibition of uncertainties (gharOEr) in sale, the requirement of an equivalent countervalue (ciwaè) must also be met. Risk (ghurm) and liability (èaman) after sale and value-addition or effort (ikhtiyOEr) are the principal components of ciwaè. As such, any increase from sale must contain ciwaè, otherwise ribOE is implicated. In classical Islamic commercial contracts such as ijOErah, salam and muèOErabah, ciwaè is evident. However, the contracts of credit of al-murOEbaúah or al-bayc bithaman OEjil are widely used by Islamic banking practitioners. To prove Islamic legitimacy, this contract must show that the financiers assume the risk of ownership in making the sale. It must also show evidence that the seller is liable to the option of defect (khiyOEr alcayb). The same holds for bayc al-c¥nah and bayc al-dayn which are also widely used in Islamic money and capital markets in some Muslim countries.