Fatwa No. (3249) Q: A matter has arisen for us, and we must deal with the bank, as we need a bank guarantee named
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Fatwa No. ( 3249 )
Q: A matter has arisen for us, and we must deal with the bank, as we need a bank guarantee named: a guarantee of good performance, meaning that the bank guarantees the good performance of the agreement according to the contract terms. We were surprised to find that the bank takes a fee for this guarantee (letter of guarantee) that it provides. We returned to the simple fiqh books available to us and found that ( the guarantee or surety ) is a voluntary act. We fell into confusion and suspended the project until we reach the correct Islamic ruling, accompanied by the Islamic evidence. We decided to send this to your eminence, given the knowledge, piety, and scrupulousness we have heard about you. Therefore, we ask your eminence to inform us of your opinion, accompanied by the Islamic evidence: Is it permissible to take a fee for a guarantee or surety? Also, what about insurance operations on goods and against accidents, and life insurance? What is the Shari'ah's opinion on such contracts? A question also reached the Committee, to which it responded with No. (6227), stating that these insurances are commercial insurance. We decided to suffice with transferring the question, as it contains details, and to suffice with the first answer to avoid repetition. May Allah grant success. The text of the question is as follows: Q: The questioner asked about the following types of insurance:
1 - Insurance of imported goods: We can cover your imports annually or each shipment individually against the risks of sea, land, and air transport, ensuring your benefit and according to your wishes. 2 - Insurance of cars of all types: This type of insurance depends on the type of car and the nature of its use, whether it is private or a cargo car. It can be covered as requested. Note that cars of all types are covered against all risks, including loss resulting from a collision, fire, or theft, and bodily injury or property damage to the third party. It is also possible to cover only the third party damaged by the insured car, in addition to fire and theft risks, or to cover only the third party in the event of an accident involving the insured car. 3 - Coverage of land truck liability: We can cover all shipments made by your trucks, to and from any area in the Kingdom of Saudi Arabia, under an annual contract that includes the maximum liability for each shipment, in case the truck is involved in a collision, overturning, or falling from
a bridge, or fire, explosion, breakage, or falling into a river. 4 - Land transport: The goods transported by land can be covered as desired for any of the following: A - Covering goods transported by land against all risks resulting from the means of transport, to and from any area inside and outside the Kingdom. B - Covering goods against risks of damage and loss in case the truck is involved in any accident during its journey to and from any area in the Kingdom of Saudi Arabia. 5 - Coverage of property: Against risks of fire, theft, and rain floods. We can cover your shops, warehouses, factories, collective housing centers for workers, and business facilities against risks of fire, theft, and rain floods. 6 - Coverage of breach of trust: Covering important documents, cash, valuable jewelry, and valuable possessions from incidents of embezzlement. 7 - Coverage of all risks for houses and villas: We can cover buildings, villas, and residential centers against any of the following risks: (fire, cracking, collapses, rain floods,
lightning, explosions, aviation damage, collisions, etc.) and other damages resulting from violence. 8 - Coverage of all risks for contractors' works: We can cover construction projects and factories of all types against all risks that the execution of the project or factory may face. 9 - Coverage of civil liability: We can cover damages resulting from any disaster that harms the third party, whatever its type. 10 - Coverage of workers' injury risks: Coverage is provided according to the regulations and system of the Labor Office in force in the Kingdom of Saudi Arabia . 11 - Coverage of personal accident risks: We can cover individual injury risks by providing medical and therapeutic care, by paying agreed-upon amounts in the event of an accident, God forbid, that results in permanent bodily harm, amputation of a limb, or death, God forbid.
A: First: The bank's guarantee for you with a profit on the amount it guarantees you for those to whom you are committed to performing any contract is not permissible; because the profit it takes
is an increase of forbidden usury or interest, and usury or interest - as is well known - is forbidden by the Book, the Sunnah, and the consensus of the Muslim community. Second: Commercial insurance is forbidden; for the following reasons: 1 - The commercial insurance contract is one of the financial exchange contracts containing excessive uncertainty in a contract; because the insured cannot know at the time of the contract the amount he will give or take. He may pay one or two installments, then the disaster occurs and he is entitled to what the insurer committed to. Or the disaster may not occur at all, and he pays all installments and takes nothing. Likewise, the insurer cannot determine what he will give and take for each contract individually. It was reported in the authentic hadith from the Prophet (peace and blessings be upon him) the prohibition of selling with excessive uncertainty in a contract. 2 - The commercial insurance contract is a type of gambling; because it involves risk in financial exchanges, loss without crime or causing it, and gain without consideration or with unequal consideration. The insured may pay an insurance installment, then the accident occurs, and the insurer pays the entire insurance amount. Or the risk may not occur, and yet the insurer gains the insurance installments without consideration. If the ignorance becomes severe, it is gambling, and it falls under the general prohibition of gambling in the saying of Allah the Exalted:[Al-Ma'idah 5:90]
and the verse after it. 3 - The commercial insurance contract contains usury of excess in a like-for-like exchange and usury of deferment. If the company pays the insured or his heirs or the beneficiary more than the money he paid to it, it is usury of excess in a like-for-like exchange. The insurer pays that to the insured after the contract period, so it is usury of deferment. If the company pays the insured the same amount he paid to it, it is usury of deferment only. Both are forbidden by text and consensus. 4 - The commercial insurance contract is a forbidden bet; because both involve ignorance, excessive uncertainty in a contract, and gambling. The Shari'ah did not permit betting except what supports Islam and makes its signs apparent by argument and swords. The Prophet (peace and blessings be upon him) limited the dispensation of betting with consideration to three things, saying (peace and blessings be upon him):Sunan al-Bayhaqi 17:689 Insurance is not of that, nor similar to it, so it is forbidden. 5 - The commercial insurance contract involves taking the money of others without consideration, and taking without consideration in commercial exchange contracts is forbidden; because it falls under the general prohibition in the saying of Allah the Exalted: [An-Nisa 4:29]
6 - In the commercial insurance contract, there is compulsion to what is not obligatory in the Shari'ah. The insurer did not cause the risk, nor did he contribute to its occurrence. He merely contracted with the insured to guarantee the risk in case it occurs, in exchange for an amount paid by the insured to him. The insurer did not perform any work for the insured, so it is forbidden. We hope that what we have mentioned will be beneficial to the questioner and sufficient.
Q: A matter has arisen for us, and we must deal with the bank, as we need a bank guarantee named: a guarantee of good performance, meaning that the bank guarantees the good performance of the agreement according to the contract terms. We were surprised to find that the bank takes a fee for this guarantee (letter of guarantee) that it provides. We returned to the simple fiqh books available to us and found that ( the guarantee or surety ) is a voluntary act. We fell into confusion and suspended the project until we reach the correct Islamic ruling, accompanied by the Islamic evidence. We decided to send this to your eminence, given the knowledge, piety, and scrupulousness we have heard about you. Therefore, we ask your eminence to inform us of your opinion, accompanied by the Islamic evidence: Is it permissible to take a fee for a guarantee or surety? Also, what about insurance operations on goods and against accidents, and life insurance? What is the Shari'ah's opinion on such contracts? A question also reached the Committee, to which it responded with No. (6227), stating that these insurances are commercial insurance. We decided to suffice with transferring the question, as it contains details, and to suffice with the first answer to avoid repetition. May Allah grant success. The text of the question is as follows: Q: The questioner asked about the following types of insurance:
1 - Insurance of imported goods: We can cover your imports annually or each shipment individually against the risks of sea, land, and air transport, ensuring your benefit and according to your wishes. 2 - Insurance of cars of all types: This type of insurance depends on the type of car and the nature of its use, whether it is private or a cargo car. It can be covered as requested. Note that cars of all types are covered against all risks, including loss resulting from a collision, fire, or theft, and bodily injury or property damage to the third party. It is also possible to cover only the third party damaged by the insured car, in addition to fire and theft risks, or to cover only the third party in the event of an accident involving the insured car. 3 - Coverage of land truck liability: We can cover all shipments made by your trucks, to and from any area in the Kingdom of Saudi Arabia, under an annual contract that includes the maximum liability for each shipment, in case the truck is involved in a collision, overturning, or falling from
a bridge, or fire, explosion, breakage, or falling into a river. 4 - Land transport: The goods transported by land can be covered as desired for any of the following: A - Covering goods transported by land against all risks resulting from the means of transport, to and from any area inside and outside the Kingdom. B - Covering goods against risks of damage and loss in case the truck is involved in any accident during its journey to and from any area in the Kingdom of Saudi Arabia. 5 - Coverage of property: Against risks of fire, theft, and rain floods. We can cover your shops, warehouses, factories, collective housing centers for workers, and business facilities against risks of fire, theft, and rain floods. 6 - Coverage of breach of trust: Covering important documents, cash, valuable jewelry, and valuable possessions from incidents of embezzlement. 7 - Coverage of all risks for houses and villas: We can cover buildings, villas, and residential centers against any of the following risks: (fire, cracking, collapses, rain floods,
lightning, explosions, aviation damage, collisions, etc.) and other damages resulting from violence. 8 - Coverage of all risks for contractors' works: We can cover construction projects and factories of all types against all risks that the execution of the project or factory may face. 9 - Coverage of civil liability: We can cover damages resulting from any disaster that harms the third party, whatever its type. 10 - Coverage of workers' injury risks: Coverage is provided according to the regulations and system of the Labor Office in force in the Kingdom of Saudi Arabia . 11 - Coverage of personal accident risks: We can cover individual injury risks by providing medical and therapeutic care, by paying agreed-upon amounts in the event of an accident, God forbid, that results in permanent bodily harm, amputation of a limb, or death, God forbid.
A: First: The bank's guarantee for you with a profit on the amount it guarantees you for those to whom you are committed to performing any contract is not permissible; because the profit it takes
is an increase of forbidden usury or interest, and usury or interest - as is well known - is forbidden by the Book, the Sunnah, and the consensus of the Muslim community. Second: Commercial insurance is forbidden; for the following reasons: 1 - The commercial insurance contract is one of the financial exchange contracts containing excessive uncertainty in a contract; because the insured cannot know at the time of the contract the amount he will give or take. He may pay one or two installments, then the disaster occurs and he is entitled to what the insurer committed to. Or the disaster may not occur at all, and he pays all installments and takes nothing. Likewise, the insurer cannot determine what he will give and take for each contract individually. It was reported in the authentic hadith from the Prophet (peace and blessings be upon him) the prohibition of selling with excessive uncertainty in a contract. 2 - The commercial insurance contract is a type of gambling; because it involves risk in financial exchanges, loss without crime or causing it, and gain without consideration or with unequal consideration. The insured may pay an insurance installment, then the accident occurs, and the insurer pays the entire insurance amount. Or the risk may not occur, and yet the insurer gains the insurance installments without consideration. If the ignorance becomes severe, it is gambling, and it falls under the general prohibition of gambling in the saying of Allah the Exalted:
O you who have believed, indeed, intoxicants, gambling, [sacrificing on] stone alters [to other than Allah], and divining arrows are but defilement from the work of Satan, so avoid it that you may be successful.
يَا أَيُّهَا الَّذِينَ آمَنُوا إِنَّمَا الْخَمْرُ وَالْمَيْسِرُ وَالأَنْصَابُ وَالأَزْلامُ رِجْسٌ مِنْ عَمَلِ الشَّيْطَانِ فَاجْتَنِبُوهُ لَعَلَّكُمْ تُفْلِحُونَand the verse after it. 3 - The commercial insurance contract contains usury of excess in a like-for-like exchange and usury of deferment. If the company pays the insured or his heirs or the beneficiary more than the money he paid to it, it is usury of excess in a like-for-like exchange. The insurer pays that to the insured after the contract period, so it is usury of deferment. If the company pays the insured the same amount he paid to it, it is usury of deferment only. Both are forbidden by text and consensus. 4 - The commercial insurance contract is a forbidden bet; because both involve ignorance, excessive uncertainty in a contract, and gambling. The Shari'ah did not permit betting except what supports Islam and makes its signs apparent by argument and swords. The Prophet (peace and blessings be upon him) limited the dispensation of betting with consideration to three things, saying (peace and blessings be upon him):
There is no racing except in the hoof, the hoof, or the blade
لا سبق إلا في خف أو حافر أو نصلO you who have believed, do not consume one another's wealth unjustly but only [in lawful] business by mutual consent
يَا أَيُّهَا الَّذِينَ آمَنُوا لاَ تَأْكُلُوا أَمْوَالَكُمْ بَيْنَكُمْ بِالْبَاطِلِ إِلا أَنْ تَكُونَ تِجَارَةً عَنْ تَرَاضٍ مِنْكُمْ6 - In the commercial insurance contract, there is compulsion to what is not obligatory in the Shari'ah. The insurer did not cause the risk, nor did he contribute to its occurrence. He merely contracted with the insured to guarantee the risk in case it occurs, in exchange for an amount paid by the insured to him. The insurer did not perform any work for the insured, so it is forbidden. We hope that what we have mentioned will be beneficial to the questioner and sufficient.
Source
www.alifta.gov.sa
The Arabic text is copied verbatim from the original source, without any edits.