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Kafalah is the Islamic guarantee/surety contract

Kafalah is the Islamic guarantee/surety contract — and, unlike wakalah, it is genuinely CONTESTED on the very point this site cares about: may the guarantor charge a fee? 'Kafala (literally "guarantee", "joining" or "merging") is called "surety" or "guaranty" in conventional finance', and functionally 'A third party accepts an existing obligation and becomes responsible for fulfilling someone's liability.' The International Islamic Fiqh Academy classes it as 'a benevolent contract, motivated by grace and mercy', and on that basis its 1985 resolution held that 'It is not permitted to charge a fee for issuing a letter of guarantee ... whether it is with or without cover', reasoning that 'in the event of guarantor's payment of the guaranteed sum, it will resemble a loan generated profit to the lender and that is forbidden in Shari'a' — though 'administrative expenses ... are permissible by Shari'a, provided they do not exceed actual expenses'. Modern practice diverges: the Shariah Advisory Council of Bank Negara Malaysia (2009-2010) permitted kafalah bi al-ujr (guarantee for a fee) for Danajamin sukuk guarantees. The disagreement is surfaced, not resolved (Wikipedia, 'Islamic finance products, services and contracts'; Maybank Islamic Centre of Excellence fatwa, 'Permissibility to charge a fee for guarantee')

What this source says

The corpus's previous mechanism entry, wakalah, was clean: the agent earns a service fee, everyone agrees that is halal, and there is no live dispute. Kafalah — guarantee, or surety — is more interesting precisely because it is NOT settled, and the fault line runs straight through the question this whole site is built around: when does a charge become riba? Start with what kafalah is, on which everyone agrees. The reference defines it plainly: 'Kafala (literally "guarantee", "joining" or "merging") is called "surety" or "guaranty" in conventional finance', and its function is that 'A third party accepts an existing obligation and becomes responsible for fulfilling someone's liability.' That third party is the kafil (guarantor); the party whose obligation is guaranteed is the makful 'anhu (the one guaranteed). If you have ever had someone co-sign a loan, stand as surety for a tenancy, or back a performance bond, you have seen kafalah's shape. Classical fiqh sorts it into kinds — the reference lists 'Kafalah Bi Al-Nafs (Physical Guarantee) and Kafalah Bi Al-Mal (Financial Guarantee)', the financial branch splitting further into 'kafalah bi al-dayn (guarantee for debt), kafalah bi al-taslim (guarantee for delivery), and kafalah bi al-dark.' A guarantee for a debt, for delivery of goods, for clear title. So far, so uncontroversial. The dispute begins the moment money changes hands for the guarantee itself. Classically, kafalah is a tabarru' — a benevolent, gratuitous act. The International Islamic Fiqh Academy describes it as 'a benevolent contract, motivated by grace and mercy.' You stand surety for your brother because it is a favour, not a trade. And it is from that starting point that the classical prohibition on charging for a guarantee follows, in reasoning that should feel familiar to anyone who has read the riba entries on this site. The Academy's 1985 resolution held: 'It is not permitted to charge a fee for issuing a letter of guarantee (in which, customarily, the amount and the period of guarantee are considered) whether it is with or without cover.' The 'why' is the part worth dwelling on, because it is a pure application of the anti-riba principle: 'in the event of guarantor's payment of the guaranteed sum, it will resemble a loan generated profit to the lender and that is forbidden in Shari'a.' Follow the mechanics. A guarantor who is called upon PAYS the debt on the debtor's behalf and is then owed that same sum back by the debtor — which is, in substance, a loan from guarantor to debtor. If the guarantor had ALSO charged a fee up front for standing surety, then across the whole transaction he has advanced money and taken back more than he put in: the classic definition of riba, dressed as a guarantee fee. That is why the classical position forbids the fee. What it does NOT forbid is recovering the real cost of the paperwork: the same resolution allows that 'administrative expenses for issuing a letter of guarantee ... are permissible by Shari'a, provided they do not exceed actual expenses for services of the same kind.' A cost-recovery charge is a service fee; a charge scaled to the amount and period guaranteed is a return on money, and it is the second that the classical ruling treats as riba by another name. This is the same substance-over-form test the corpus applies everywhere, applied to surety. Modern practice, however, has not stood still, and honesty requires stating that plainly rather than pretending the classical view is the only one. Some contemporary councils permit kafalah bi al-ujr — a guarantee provided for a fee — treating the guarantee as a genuine service that carries cost and risk rather than as a disguised loan. The Shariah Advisory Council of Bank Negara Malaysia, in rulings around 2009-2010, permitted a fee-bearing guarantee (kafalah bi al-ujr) in the context of Danajamin's sukuk guarantee facility, under which the guarantor could recover from the issuer amounts paid out to investors. So the reader is left, correctly, with a live disagreement rather than a tidy answer: a classical/Fiqh-Academy position that a guarantee must be free because a paid, paying guarantor looks like a profiting lender; and a modern institutional position that a structured guarantee fee, kept distinct from the recovery of any sum advanced, is a payment for a real service and a real risk. This corpus does not resolve that dispute — it is not the site's place to issue a fatwa — but it does insist on framing it faithfully. Kafalah earns its place beside wakalah for exactly that reason. Wakalah showed the clean case: a fee for agency that no one contests. Kafalah shows the hard case: a fee for standing behind another's debt, where the line between an honest service charge and riba is thin enough that the scholars themselves divide over where to draw it. Knowing WHERE the disagreement sits — on the fee, not on the guarantee — is more useful to a Muslim reading a real bank-guarantee contract than any false certainty either way.

Wording inside quotation marks is quoted from the source. The rest is this notebook’s summary of it — read the original before relying on it.

Provenance

Compiled from: Compiled from two genuinely different third-party references cross-read 2026-07-02: Wikipedia, 'Islamic finance products, services and contracts' (Kafalah section) for the definition/classification, and the Maybank Islamic Centre of Excellence fatwa page 'Permissibility to charge a fee for guarantee', which reproduces the International Islamic Fiqh Academy (OIC) resolution of its second session (1985) and the Shariah Advisory Council of Bank Negara Malaysia ruling on kafalah bi al-ujr
Source: DEFINITION & CLASSIFICATION ('Kafala (literally "guarantee", "joining" or "merging") is called "surety" or "guaranty" in conventional finance'; 'A third party accepts an existing obligation and becomes responsible for fulfilling someone's liability'; types 'Kafalah Bi Al-Nafs (Physical Guarantee) and Kafalah Bi Al-Mal (Financial Guarantee)', financial guarantee splitting into 'kafalah bi al-dayn (guarantee for debt), kafalah bi al-taslim (guarantee for delivery), and kafalah bi al-dark') + BENEVOLENT NATURE ('a benevolent contract, motivated by grace and mercy') + CLASSICAL PROHIBITION ON A GUARANTEE FEE ('It is not permitted to charge a fee for issuing a letter of guarantee (in which, customarily, the amount and the period of guarantee are considered) whether it is with or without cover') + THE RIBA REASONING ('in the event of guarantor's payment of the guaranteed sum, it will resemble a loan generated profit to the lender and that is forbidden in Shari'a') + THE COST-RECOVERY EXCEPTION ('The administrative expenses for issuing a letter of guarantee ... are permissible by Shari'a, provided they do not exceed actual expenses for services of the same kind') + THE MODERN DIVERGENCE (Shariah Advisory Council of Bank Negara Malaysia permitted kafalah bi al-ujr — a guarantee for a fee — for the Danajamin sukuk guarantee facility, c.2009-2010) — two genuinely DIFFERENT third-party sources, verbatim, cross-read 2026-07-02: [1] Wikipedia, 'Islamic finance products, services and contracts' (https://en.wikipedia.org/wiki/Islamic_finance_products,_services_and_contracts), Kafalah section — verbatim: the 'guarantee/joining/merging' literal-meaning + 'surety'/'guaranty' definition, the 'A third party accepts an existing obligation ...' function line, and the Kafalah-Bi-Al-Nafs/Kafalah-Bi-Al-Mal type list with the three financial-guarantee sub-kinds. [2] Maybank Islamic Centre of Excellence fatwa, 'Permissibility to charge a fee for guarantee' (https://www.maybank.com/islamic/en/coe/fatwa/islamic-banking/permissibility_to_charge_a_fee_for_guarantee.page) — verbatim reproductions of the International Islamic Fiqh Academy (OIC) resolution from its second session (1985): the 'benevolent contract, motivated by grace and mercy' characterisation, 'It is not permitted to charge a fee for issuing a letter of guarantee (in which, customarily, the amount and the period of guarantee are considered) whether it is with or without cover', the 'it will resemble a loan generated profit to the lender and that is forbidden in Shari'a' reasoning, and the 'administrative expenses ... permissible by Shari'a, provided they do not exceed actual expenses for services of the same kind' exception; plus the same page's account of the Shariah Advisory Council of Bank Negara Malaysia permitting kafalah bi al-ujr for the Danajamin sukuk guarantee. The core CONTEST (classical no-fee vs modern fee-permitted) is therefore attested on the second source directly, with the classical definition cross-confirmed by the first.
School / basis: Comparative / foundational, and openly CONTESTED (kafalah = the guarantee/surety contract; 'a third party accepts an existing obligation and becomes responsible for fulfilling someone's liability'; classically a benevolent tabarru' contract 'motivated by grace and mercy'. The FEE is the disputed point: the International Islamic Fiqh Academy (1985) held that charging a fee for issuing a letter of guarantee is not permitted because a guarantor who pays and is repaid resembles 'a loan generated profit to the lender and that is forbidden in Shari'a', allowing only cost-recovery 'administrative expenses ... provided they do not exceed actual expenses'; some modern councils, e.g. the Shariah Advisory Council of Bank Negara Malaysia (c.2009-2010, Danajamin sukuk guarantee), permit kafalah bi al-ujr — a fee-bearing guarantee — treating it as a paid service bearing real risk. The disagreement is surfaced, not resolved)
Original: https://www.maybank.com/islamic/en/coe/fatwa/islamic-banking/permissibility_to_charge_a_fee_for_guarantee.page
Captured: 2026-07-02
Added: 2026-07-02
Trust: Useful and cited, but with an editorial or commercial lean worth cross-checking.

Compiler’s note

First DEDICATED KAFALAH (guarantee/surety) entry in the corpus — flagged as the NEXT natural candidate at the end of round-85 (wakalah), which named 'kafalah (guarantee/surety) or rahn (pledge/collateral) — both sit in the same "Contracts of safety, security, and service" family as wakalah and neither has a dedicated entry yet.' Grep-confirmed before writing: `ls content/articles | grep -iE 'kafala|kafalah|rahn|pledge|guarantee|surety|collateral'` returned NOTHING — no duplication. WHY THIS ENTRY IS NOT A REPEAT OF WAKALAH: wakalah is the clean, uncontested fee-for-service AGENCY contract; kafalah is the GUARANTEE/SURETY contract, and it is deliberately chosen as the corpus's honest CONTESTED-mechanism companion — the fee question divides scholars, which is exactly the kind of live disagreement the no-fabrication discipline wants surfaced rather than smoothed over (cf. the tawarruq 'contested' entry). THE LOAD-BEARING POINT: the classical prohibition on a guarantee fee is a PURE application of the site's own anti-riba logic — a guarantor who pays the debt and is repaid has, in substance, made a loan, so an added fee makes him a lender who took back more than he advanced = riba; the entry states this mechanism explicitly from the source's own reasoning ('it will resemble a loan generated profit to the lender and that is forbidden in Shari'a') and contrasts it with the permitted cost-recovery of 'administrative expenses ... provided they do not exceed actual expenses', then honestly reports the MODERN divergence (kafalah bi al-ujr permitted by SAC Bank Negara Malaysia for Danajamin). VERIFICATION: every load-bearing quote verified BY ME 2026-07-02 across TWO genuinely different WebFetch sources, verbatim. The definition/classification/type-list quotes are from Wikipedia 'Islamic finance products, services and contracts' (Kafalah section). The benevolent-contract characterisation, the full 1985 no-fee resolution text, the riba reasoning, the administrative-expenses exception and the SAC BNM kafalah-bi-al-ujr/Danajamin permission are verbatim from the Maybank Islamic Centre of Excellence fatwa page reproducing the International Islamic Fiqh Academy resolution. TRUST 'medium' (one encyclopaedia page + one bank-Shariah-board fatwa page that itself quotes the IIFA resolution and the SAC BNM ruling; NOT the primary IIFA resolution document or the primary SAC BNM resolution read directly). DELIBERATELY DROPPED / NOT ASSERTED per the no-fabrication rule: (a) the specific IIFA resolution NUMBER (the well-known Letters-of-Guarantee resolution is commonly cited as No. 12 (2/12) of the 1985 Jeddah session, but I did not verify that number verbatim on the fetched page, so the entry says only 'its second session (1985)' as the source presents it, and asserts no resolution number); (b) the specific SAC BNM resolution number/date beyond the approximate c.2009-2010 window and the Danajamin context the source gives; (c) any Qur'anic verse or hadith collection number for kafalah's permissibility (Surah Yusuf's 'za'im' verse is classically cited but no numbered proof-text was verbatim-verified here, so none is invented); (d) any AAOIFI standard number; (e) any market/volume figure. FRESHNESS-HONEST: all claims are structural/definitional or dated to their stated rulings; no volatile current statistic. JSON-only per the established article convention (content/articles/*.json feed app/lib/corpus.ts via readdirSync + the /corpus stats badge + Phase-2 retrieval; NOT rendered as individual routed cards), so no SourceCard/route/href added and internal-link integrity is unaffected. Articles 45->46, corpus total 143->144 (articles 46 + books 23 + youtube 23 + curated 52 = 144). NEXT natural candidate for a future run: rahn (pledge/collateral) — the remaining core 'contracts of safety, security, and service' member with no dedicated entry, and the security counterpart to kafalah's personal guarantee; or hiwalah/hawala is already covered so kafalah+rahn would complete the security-contract cluster. PUNCH-LIST FULLY TICKED; this entry advances the sole live corpus lever.

Topics

islamic-financekafalahkafalaguaranteesuretysuretyshipkafilmakful-anhukafalah-bi-al-ujrguarantee-feeribatabarrubenevolent-contractletter-of-guaranteebank-guaranteeperformance-bondfiqh-academybank-negara-malaysiashariah-advisory-councildanajamincontestedsubstance-over-formscholarly-disagreement

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