Ujrah on KafÉlah in Islamic Jurisprudence: A Comparative Study

Abstract

Many financial institutions usually charge ujrah for issuing a kafÉlah. Banks take between 0.125% and 0.25% from the kafÉlah money annually for offering a guarantee letter. If the customer delays the payment of the kafÉlah debt (letter of guarantee), the bank will accrue interest of up to 12% per year of the debt value. So, the question is: is it permissible in Islam to take ujrah on kafÉlah? The paper addresses three issues to answer this question. First: the definition of the terms kafÉlah and ujrah. Second: the jurists’ viewpoints on the consequences of kafÉlah. Third: the jurists’ position on demanding ujrah for kafÉlah.