Bai Al Dayn in Islamic Finance

UAE Laws and Islamic Finance

Bai Al Dayn  [i] means the selling of debt in Arabic.  Currently, products based on this concept are allowed in Malaysia, but not heavily practiced in the Middle East due to the differing opinions of the different schools of Islam on whether or not Bai Al Dayn is acceptable under the Sharia’h  [ii].  In Malaysia, for example, Bai Al Dayn is the basis for the sale and purchase of Islamic securities, debt certificates, and various products.  In the Middle East, the majority of scholars consider the trading of debt to be similar to the trading of money and therefore ribawi   [iii] or riba  [iv] (interest)-bearing.

According to several Malaysian scholars whom accept Bai Al Dayn as a valid instrument under the Sharia’h, “Bai Al Dayn means a sale and purchase transaction of a ‘quality debt’ i.e. the default risk of the debtor is low and the debt must be created…

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