Wednesday Academic Dialogue (13-1439)

Do We Need to Review our Starting ?

BENEFITS OVER A 3^rd PARTY LOAN

Prof. Dr. Abdullah M. Al-Omrani

Professor of Jurisprudence at the Faculty of Sharia,

Imam Muhammad bin Saud Islamic University Riyadh

Wednesday 06-12-2017 (18-03-1439H)

Abstract

This paper attempts in analyzing the Shari'ah contractual principles governing benefits over a 3^rd party loan, its structure and also practical mechanisms of the education loan. For example; I lend to X who will be awarded with the benefit by Y in one's capacity as the 3^rd party by undertaking a vicarious liability in the deal. The discussion focuses on two core issues namely; the commission is deductible from the merchant through the credit card; secondly; the interest chargeable against the 3^rd party over a loan traction. I did not find explicit views of scholars addressing the above issues, though in practice it is deductible from common texts, and thus, it has been discussed among the Fuqaha in recent years in several occasions. Such views of the Fuqaha have been used by the banks as presidential references in treating such loan transactions. In having a positive notion in the banking practices, the issue of education loan facilitated by banks where the bank awards interest-free financial facility to students in settling their tuition fees and other required education expenses. But on settlement of such loan with discount, the university undertakes a 3^rd party vicarious liability. It was also discussed over the issue of the commission that, the bank takes it from the merchant through credit card. In this situation, a third party (other than the borrower) shall undertake in settling the interest over the loan while the principal debtor does not pay anything other than only the amount of principal loan. Some contemporary scholars differ the above view on two grounds namely; the permissibility and the prohibition, and each group have one's own justification