Intersection with Trade-Based Finance: Sales Standards
Murabahah + the Murabahah standard + Debt Standards: A Murabahah creates a customer debt to the bank. This debt is then governed by the standard (can it be sold?), the Procrastinating Debtor standard (if customer defaults), and the Insolvency standard (if customer becomes insolvent). Additionally, the Murabahah standard states that Murabahah receivables cannot be issued as negotiable Sukuk unless they meet the Sale of Debt standard asset-mixing rules.
Salam + the Salam standard + A Salam (advance sale) creates a supplier debt to the buyer. Per, if the supplier defaults and the buyer wants to substitute the Salam asset for a different commodity, this is permitted if: (a) it is not stipulated in the contract, and (b) the substituting asset's market value does not exceed the original asset's value.
Intersection with Guarantees
A guarantor becomes jointly liable with the debtor. If the debtor defaults, creditor can demand payment from the guarantor OR the debtor. If the guarantor becomes insolvent before payment, insolvency rules apply to the guarantor's assets.
Intersection with Collateral and Options
A debt may be secured by a mortgage (Rahn). If the debtor defaults, the creditor can exercise the option to sell the collateral. Additionally, the Trust-Based Options standard (Options) governs conditions like "option to terminate" if the debtor breaches. These options interact with debt restructuring.
Intersection with Profit Calculation
If a debt is sold, the price at which it is sold must comply with the Profit Calculation standard profit rules. For example, a monetary debt sold for a commodity must avoid any riba-like gain.
Key Cross-Domain Rules
| Scenario | Key Standards |
|---|---|
| Customer defaults on Murabahah | the Murabahah standard (Murabahah), the Procrastinating Debtor standard (default), the Guarantees standard (guarantees if applicable) |
| Bank wants to sell Murabahah receivables | the Sale of Debt standard (sale of debt), the Murabahah standard (Murabahah limit on Sukuk) |
| Customer insolvent, owes Murabahah | the Murabahah standard, the Sale of Debt standard, the Insolvency standard (insolvency) |
| Debtor requests Hawalah on Murabahah debt | the Hawalah standard (Hawalah), the Murabahah standard (no refinance at higher price) |
| Debtor wants to settle debt via set-off | the Debt Set-Off standard (set-off), the Trading in Currencies standard (currency exchange if multi-currency) |