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ISLAMIC BUSINESS TRANSACTION

Y
CHAPTER TWELVE

AL--WADIAH
AL

MAHYUDDIN KHALID Y emkay@salam.uitm.edu.my


] 
Y DEFINITION
DEFINITION Y EVIDENCE
Y PILLARS
EVIDENCE Y SIGNIFICANCE OF AL-WADIAH
Y MODERN APPLICATION
TYPES

SIGNIFICANCE

APPLICATION

COMPARISON

î
à 
Y Literally:
DEFINITION Al-wadiah it means to leave, quit, abandon etc
Y Technically:
EVIDENCE A thing or commodity committed to the trust and care of a
person
TYPES A contract whereby a person leaves his property for safe
protection to another person
SIGNIFICANCE

Y Al-wadiah is the commission given by the depositor to the


APPLICATION depositary for holding his property in safe custody; al-amanah

COMPARISON

u
à]
Y Al-Quran:
DEFINITION .

EVIDENCE

TYPES Y Hadith:
ŒDischarge the trust to the person who entrust it to you, and
SIGNIFICANCE do not betray the one who betrays youµ

APPLICATION Y Ijma·:
The scholars from every single era of the Islamic eras had
COMPARISON came to a consensus on the permissibility of the Wadiah c
ontract since it is desired by the people in general to the
extent that it is actually an essential and vital contract for the
society
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ë
  à
1. Al ² Muwaddi·
DEFINITION Depositor, Owner of the property
î. Al ² Wadi·
EVIDENCE Depositee, Custodian of the property
u. Al-Wadiah
TYPES Property for safe keeping
4. Sighah
SIGNIFICANCE
Offer (Ijab)
Acceptance (Qabul)
APPLICATION

COMPARISON

‰

  à

DEFINITION
Ijab (Offer)

EVIDENCE

TYPES

Al-Muwaddi· Al-Wadiah Al ² Wadi·


SIGNIFICANCE (Depositor, Owner of the (Property for (Depositee, Custodian of the
property) safe keeping) property)

APPLICATION

COMPARISON

Qabul (Acceptance)

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ë
  à
 
DEFINITION 1. Wadiah Yadd al- Act of Trust
Amanah Bank acts as a trustee to the fund.
EVIDENCE If the money under custody is accidentally lost or
destroyed, the custodian is not obliged to replace
TYPES
or compensate it.

î. Wadiah Yadd al- Act of Guarantee


SIGNIFICANCE
Dhamanah
Bank·s responsibility is in form of guarantee
If the deposits are pooled together and are
APPLICATION
utilized, it is compulsory for the
bank to return the fund as when requested by the
COMPARISON customer

Î
 à ]  ]   
  

Y Al-Wadiah: Act of Trust (amanah) or Act of Gurantee


DEFINITION (dhamanah)?
The jurists from different mazhabs had agreed that al²
EVIDENCE Wadiah is an act of good deed which is encouraged
(mandub), and there is reward (in the hereafter) for its
preservation.
TYPES
It is essentially an act which is based on pure trust(amanah)
and not a guarantee (dhamanah).
SIGNIFICANCE
The depositee is not liable to be the guarantor of the contract
except for cases of carelessness or negligence.
APPLICATION
Hence, it is not legal to require the trustee to be a guarantor
(accountable).
COMPARISON

ü
 à ]   
 ]  ]   

Y Besides the cases of ignorance, contract of Wadiah could be


DEFINITION transformed from trust (amanah) into guarantee (dhamanah) in
the following cases if the depositee:
EVIDENCE 1. Ignores the protection and safe keeping of the deposited
property
TYPES î. Deposits the property with somebody else, or not somebody
who normally takes care of the depositee·s property.
SIGNIFICANCE
u. Benefits from the usage of the deposited property
4. Travels with the deposited property.
APPLICATION
‰. Refuses to return the deposited property to the depositor or
withholds it even though he/she is capable of returning it.
6. Mixes the deposited property with other properties, which
COMPARISON
could not be recognized and distinguished from each other.
Î. Commits certain conducts which are against the
predetermined condition of the depositor.



]]   à
1. Safeguard and protect any valuable from being stolen,
DEFINITION destroyed or misplaced.
î. The protection of valuables for almost everybody who thinks
their home and office are not safe enough. It is also costly and
EVIDENCE
not cost effective (except for bigger corporations) to manage
these properties on their own since not everybody could afford
TYPES to manage their valuables on their own and still need
professional individuals or groups to handle it.
u. Furthermore, in the case of Cash Deposits, it could also be used
SIGNIFICANCE
for investment purposes and can contribute to the economic
growth of the nation from two aspects:
APPLICATION a. The surplus units (depositors) could channel their cash for
the deficit units (companies and entrepreneurs). They can
obtain return in the form of dividends or profit.
COMPARISON
b. The deficit units (companies and corporations) could obtain
funds for the financing of their projects from the pool of
funds deposited by the surplus units.

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ë  à    
    à  à

× Al²Malikiah , Abu Yusof, Al- The profit is for the depositee who traded the
Laiths and Sufyan cash
DEFINITION
REASON:
1. The agent (depositee) is the guarantor and custodian of the money until it is
EVIDENCE returned back to the real owner.
î. The depositor does not essentially enter the contract of Wadiah with the
intention of gaining any profit but with the purpose of safe guarding their
TYPES deposited property. Hence, they should be given their original property
without any amount of profit.
SIGNIFICANCE  Abu Hanifah The depositee should donate the profit without
benefiting from the proceeds
REASON:
APPLICATION
1. The revenues were earned through an illicit gain.
î. If it is forbidden to sell the Wadiah property, the acquired profit would be
COMPARISON considered as an illicit gain which could only be purified through donation
and charity.
 The profit will be shared and split between the depositor and depositee on the
basis of Mudharabah contract.

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Y Responsibility of an Islamic Bank is considered as Yad
DEFINITION Dhamanah when:
Bank imposes certain fee on the safe keeping of the items and
EVIDENCE provides a special place for the safe custody of these items.
The bank will be held responsible for the replacement of
TYPES these items in cases of loss, damage or destroy even if these
disaster occur unintentionally or due to negligence.
SIGNIFICANCE
Bank uses the cash money for business purposes. In this case,
the bank is obligated to fully return the al-Wadiah money
that has been used back to the owner, regardless of whether
APPLICATION the bank had made any profit or even loss from the business
venture using the al²Wadiah money.
COMPARISON This means that any profit would be owned by the bank and
they have the right to give all or part of the proceeds back to
the depositor based on their discretion as a gift or token
which are not promised earlier

 à  ëë] 
Y Al-Wadiah Current Account
DEFINITION Islamic Bank mobilizes customers· deposits in Current
Account under the principles of Al-Wadi·ah Yad Dhamanah
(guaranteed custody).
EVIDENCE
It is based on the combination of contract of custody (al-
Wadi·ah) and guarantee (Yad Dhamanah).
TYPES Bank receives deposits from its customers who want to make
a safe custody of their funds and utilizing the services
SIGNIFICANCE
provided under the scheme of a current account.
The bank then will ask permission to utilize their funds.
However, the customers may withdraw their saving any time
APPLICATION they desire.
All the profit generated by the bank from the use of funds
COMPARISON belongs to the bank.
The bank provides cheque books and other services provided
by conventional bank to the current account.

1u
 à  ëë] 
Y Al-Wadiah Saving Account
DEFINITION Islamic Bank mobilizes customers· deposits in Savings
Account under the principles of Al-Wadi·ah Yad Dhamanah
(guaranteed custody).
EVIDENCE
It is based on the combination of contract of custody (al-
Wadi·ah) and guarantee (dhamanah)
TYPES Bank accepts deposits from its customers who want to make a
safe custody of their fund
SIGNIFICANCE Profit generated by the bank from the use of such funds
belong to the bank.
Bank may at his discretion reward the customer by returning
APPLICATION
a portion of profits generated from the use of their funds
from time to time.
COMPARISON Bank provides its customers with saving passbook and other
usual services provided for saving accounts by the
conventional banks. ah).

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à 
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DEFINITION Loan contract CONTRACT Wadiah (safe-keeping)
contract
EVIDENCE

Lender ² Borrower RELATIONSHIP Depositor ² Depositee


TYPES

SIGNIFICANCE Deposits are paid interest INCOME Deposits are not entitled to
any income
Conventional banks must OBLIGATION Islamic banks may give the
APPLICATION
give the depositers their depositer a share of the
interest payment profits generated at their
COMPARISON discretion
Deposits are liability PRODUCTS Deposits are either a trust or
products of a bank guarantee products of a bank


à  ]ë

DEFINITION

EVIDENCE

TYPES

SIGNIFICANCE Y
APPLICATION

COMPARISON

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