6.

HAWALAH

6.1

Introduction

Hiwalah means moving or changing. It also can be describe as a contract which

caused the transfer of debt from one party to another.
6.1.1 Definition
Literally:
Means change, transfer or removal.
Technically:
Transfer of debt (liability) by way of security and corroboration, from the original
debtor (transferor) to another person to whom it is transferred (transferee).
6.1.2 Basic principles
i.

Hawalah is a contract resulting from the consent of the three parties, the

ii.

borrower (Al-Muhal), lender (Al-Muhil) and the payer.

Hawalah is a binding contract. This means, each must execute the

iii.

agreement signed.
It is a requirement that the debt transfer should be implemented without
any delay and not temporary. However, the delay allowed for the duration
of the transfer debt to a future date.

6.2
i.

Pillar of Al-Hawalah

Al-Muhil (transferor, debtor)

A person who is transfers his debt to another person.

Al-Muhal Lah (creditor, transferred party)

A creditor, whom his property/ debt is transferred to be paid by another

ii.

person instead of his debtor.

iii.

Al-Muhal Alaihi (transferee)

Transferees a person who accept a Hawalah to himself.
Al-Muhal Bih (the transferred debt)
The things which is transferred by Hawalah.

Sighah
Offer by a debtor (Ijab)
Acceptance by the transferee and the creditor (Qabul)

iv.
v.

6.3
i.

Rules and Conditions of Al-Hawalah

Transferor
Must possess legal capacity and eligible.
Consent of the principal debtor (analogy to transfer of ownership).

ii.
Principal Creditor
Legal capacity (legally competent).
Consent.
Acceptance to the contract (clear words).
iii.
Transferee
Same conditions as the conditions of the creditor/ Ability to repay the debt

(if not contract can be terminated).

Transferee can be individual or group.

iv.
Transferred Item:
a) It must be a debt.
b) The debt must be binding or real debt
c) It must be legal debt (debt of unlawful reason not under subject of
Hawalah). Validity of the new obligation will be effective only when it flows
from a valid obligation (When the original has failed, the brance fails too).
d) The both debt must be known to the contracting parties.
e) It must be transferable. Muslim jurist also agree that the transferor may
transfer a lesser amount of a debt owed to the transferee to settle from a
larger amount of the debt owed by the transferor on condition that the
transferee is entitled only to the equivalent amount of his debt.

Sighah

Must be clear to show consent (words, express, writings, signs and

gestures).
Must be in correspondence to one another (Muwafaqah).

6.4

Types of Al-Hawalah

i.

Hawalah Muthlaqoh
The contract is concluded without reference to the debt on the transferee

and he accepts the transfer.

Happen if the debtor (first person) to another (the second) right shift
billing to third parties without the third party based on this owes to the
first.

ii.
Hawalah Muqoyyadah
Happen when a transfer is made with reference to the debt on the

transferee. The majority only recognizes this type of Hawalah.

Happen if Al-Muhil turned right to Al-Muhal addiction for the last Al-Muhal
Alaihi has to Al-Muhal debt.

6.5

Based on fairness relevant in Financial System

Based on Islamic financial products in the financial system, there are too many
example of the modern transaction that applies in Islamic Financial Institution
(IFI) nowadays. One of them is the Bills of Exchange. By this application, it enables a
debtor to make payments in another place through his agent or a second person.
For example, a person gives a portion of his property to a merchant to pay to
another person in a different country. The sender benefits by insuring himself
against the risks of transferring that property himself.