Case Study 1: The Home Finance Product Audit
Al-Barakah Islamic Bank launches a new home finance product called "EasyHome" with the following structure:
- Client identifies a property and signs a Promise to Purchase (Wa'ad) with the bank.
- Bank appoints the client as its agent (Wakil) to purchase the property.
- Client (as agent) purchases the property in the bank's name.
- Bank immediately sells the property to the client at cost + 30% profit, payable over 20 years.
- Sale contract contains a clause: "In the event of prepayment, profit will be recalculated at cost + 25%".
- Separate side letter: "Client undertakes to maintain a minimum deposit balance of $50,000 with the bank for the duration of financing".
- If the client defaults on 3 consecutive payments, the bank may charge a "restructuring fee" of 2% of the outstanding balance, added to total debt.
Element-by-Element Compliance Analysis
| Element | Topic | Compliant? | Analysis |
|---|---|---|---|
| Promise to Purchase | Promise rules | ✅ Yes | Client's promise is binding because bank will incur liability (purchasing property) in reliance |
| Agency appointment | Combination of contracts | ✅ Yes | Client acting as agent is a subsidiary arrangement in the Murabahah — formal prerequisites waived |
| Sale at cost + 30% | Profit calculation | ✅ Yes | No upper limit on profit; percentage of cost is permissible; must disclose cost and profit separately |
| Prepayment rebate (30% → 25%) | Profit calculation | ⚠️ Conditionally | Reducing profit on prepayment is a discount, not increase — permissible. But if 30% was inflated to create room for the "rebate," this could be questioned |
| Minimum deposit requirement | Combination of contracts | ❌ No | Combining a sale with a deposit requirement provides the bank gratuitous use of $50,000 for 20 years — a loan-linked benefit to the lender |
| Restructuring fee added to debt | Late-payment fiqh | ❌ No | Adding 2% to outstanding balance on default increases debt due to late payment — riba al-jahiliyyah |
Case Study 2: Gharar in Digital Assets
A client wants to invest $500,000 in a tokenized real estate fund. The fund issues digital tokens on a blockchain, each representing fractional ownership of a portfolio of 15 commercial properties. The portfolio changes quarterly as the fund manager buys and sells properties. Token holders receive quarterly distributions from rental income. Tokens trade on a secondary market.
Element-by-Element Compliance Analysis
| Element | Topic | Compliant? | Analysis |
|---|---|---|---|
| Token purchase contract type | Gharar | ✅ Yes | Exchange-based — first invalidating condition is met, so gharar analysis proceeds |
| Portfolio composition uncertainty | Gharar | ✅ Yes (medium) | Current portfolio is known at time of purchase. Quarterly changes are a corollary (Tabi') — medium gharar does not invalidate |
| Primary subject matter | Gharar | ✅ Yes | Current 15 properties are known; this is the primary object. Future changes are subsidiary, not primary |
| Token ownership rights | Financial rights | ⚠️ Conditional | Tokens must convey genuine ownership or usufruct rights — NOT mere income claims. Requires legal review of token documentation |
| Fund manager's authority | Combination of contracts | ✅ Yes | Manager's buy/sell activity is a subsidiary Wakala arrangement; gharar tolerance concession applies to future portfolio changes |