IslamicFina · KNOWLEDGE CHALLENGE
Explore four quizzes: three 15-question True/False sets and one 10-question AAOIFI Standards MCQ challenge. Submit each quiz to see your score, correct answers, and explanations.
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15 challenging BS-level True/False questions · Juristic schools, legal interpretation, and Hukm al-Shar‘i
Q1 When a Companion exercised ijtihād in the Prophet’s ﷺ absence and later received his approval, the ruling continued to be regarded solely as the Companion’s independent opinion rather than becoming part of the Sunnah.
False
Once the Prophet ﷺ approved a Companion’s ijtihād, it became part of the Sunnah rather than remaining merely the Companion’s independent opinion.
Q2 Hazrat Umar’s (RA) discontinuation of Zakat assistance to certain tribal leaders is presented as a change in the application of a Qur’anic ruling due to changed circumstances, rather than the cancellation of the Qur’anic provision itself.
True
The lecture explains that Umar (RA) treated the earlier reason for the payments as no longer applicable in the changed circumstances; he did not cancel the Qur’anic provision.
Q3 Different regional approaches to fiqh could emerge among the Tabi‘een even when they relied upon the same Qur’an and Sunnah, because they inherited different methods of ijtihād from the Companions under whom they studied.
True
Different Companions developed distinctive approaches to interpretation and ijtihād, which were passed to their students and influenced the legal traditions of different regions.
Q4 The lecture attributes the greater historical continuity of Imam al-Shafi‘i’s juristic school compared with that of Imam al-Layth ibn Sa‘d mainly to their different interpretations of Islamic law, rather than to the documentation and preservation of their ijtihād.
False
The lecture emphasizes that documentation, preservation, and transmission of ijtihād helped Imam al-Shafi‘i’s school continue, whereas Imam al-Layth’s work was less systematically preserved.
Q5 Because the Sahabah directly witnessed the revelation of the Qur’an, disagreements arising from different possible meanings of Qur’anic expressions, such as Qurū’ in the rules of ‘Iddah, emerged only among later jurists and not among the Companions themselves.
False
Some Qur’anic expressions permit more than one linguistic interpretation. The Companions themselves differed over expressions such as Qurū’, despite their direct connection with the period of revelation.
Q6 When a jurist uses a general rule of interpretation to determine the ruling of a particular financial transaction, the interpretive rule belongs to Usul al-Fiqh, while the resulting practical ruling belongs to Fiqh.
True
Usul al-Fiqh provides the methodological principles for deriving rulings from evidence, whereas Fiqh concerns the practical legal rulings reached through those principles.
Q7 The requirement of two witnesses for a valid Nikah is classified as Hukm al-Taklifi because it obliges the parties to arrange witnesses before concluding the marriage.
False
The material classifies the presence of witnesses as a Sharṭ (condition) of the validity of Nikah, and therefore as Hukm al-Waḍ‘ī, rather than merely a direct demand to act.
Q8 If a factor is recognized by the Sharī‘ah as the cause of a legal ruling (Hukm Shar‘ī), it must be classified as ‘Illah rather than Sabab, even when no rational relationship between that factor and the ruling can be established.
False
In the supplied lesson, ‘Illah has an identifiable rational and effective relationship with the ruling, whereas Sabab serves as a recognized legal trigger without necessarily having an apparent rational connection.
Q9 According to Hanafi Usul al-Fiqh, a binding command established through Zanni al-Thubut but Qat‘i al-Dalalah evidence may be classified as Wajib rather than Fard, even though compliance remains obligatory.
True
In the supplied Hanafi classification, Fard requires definitive certainty of both establishment and meaning; a binding command with speculative establishment may be classified as Wajib.
Q10 According to Hanafi jurists, when an Ahad Hadith explicitly describes an act as forbidden, that act must be classified as Haram rather than Makruh Tahrimi, because explicit wording is more important than the certainty of transmission.
False
The Hanafi classification in the lesson considers the evidentiary certainty of transmission. A binding prohibition derived from speculative evidence is treated as Makruh Tahrimi rather than Haram.
Q11 A Nafl fast may be voluntary before commencement but obligatory to complete under Hanafi jurisprudence once started, whereas Shafi‘i jurists do not treat its commencement as making completion Wajib.
True
The lesson distinguishes the Hanafi view that completion of a commenced Nafl fast becomes binding from the Shafi‘i view that beginning it does not make completion Wajib.
Q12 Because both Sunnah Mu’akkadah and Sunnah Ghayr Mu’akkadah fall within Mandub, habitual neglect of either carries the same degree of blameworthiness, although neither omission attracts the punishment of abandoning Fard.
False
The supplied lesson distinguishes the two: neglect of the emphatic Sunnah is considered blameworthy, while neglect of Sunnah Ghayr Mu’akkadah does not carry the same blame.
Q13 An exchange of equal quantities of gold for gold with deferred delivery is classified as Haram li-Dhatihi because the element of delay makes the exchange itself an act forbidden for its own sake.
False
The material uses deferred gold-for-gold exchange as an example of Haram li-Ghayrihi: exchanging gold is originally permissible, but delay introduces a prohibited feature.
Q14 Since the arrival of Ramadan is the Sabab for obligatory fasting, Ramadan can also be regarded as the ‘Illah of fasting because the arrival of the month provides a rational explanation for the obligation.
False
Ramadan is the legally designated Sabab for fasting, whereas ‘Illah denotes a cause with an identifiable rational relationship to the ruling, such as intoxication in the prohibition of wine.
Q15 Under Hukm al-Wad’i, a Sabab may be an act within the Mukallaf’s control, such as offer and acceptance in a sale, or an occurrence beyond his control, such as the arrival of prayer time.
True
The lesson distinguishes causes within human control, such as offer and acceptance, from externally occurring causes, such as the arrival of prayer time.
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15 challenging True/False questions · Contract formation, validity, Gharar, options, and sales
Q1 According to jurists who recognize written contracts, the requirement that offer (Ījāb) and acceptance (Qabūl) occur in the same Majlis does not necessarily mean that both parties must be physically present in one place.
True
The contractual session may be understood as the period allowing communication of offer and acceptance; jurists who recognize writing do not require the parties to stand together physically.
Q2 A penalty clause (Al-Shart al-Jaza’i) will be stipulated against the Mustasni‘ for default in any payment under an Istisna‘ contract.
False
A penalty may be stipulated against the manufacturer (Ṣāni‘) for unjustified delay in completing or delivering the work. A financial penalty against the purchaser (Mustasni‘) solely for late payment would increase a debt and is not permissible.
Q3 Hawalah with recourse is the right of the principal debtor to claim his debt from the Muhīl if the payer fails to pay the debt.
False
Recourse is the creditor’s (Muḥāl Lahu) right to claim against the original debtor (Muḥīl) if the substituted debtor (Muḥāl ‘Alayhi) does not pay under a Hawalah arrangement permitting such recourse.
Q4 A sale may become impermissible because of the intended use of its subject matter, even when the commodity itself is lawful and both parties have freely agreed to the transaction.
True
A lawful item may not legitimately be supplied where the intended purpose of that transaction is known to be unlawful; the underlying purpose can affect contractual legitimacy.
Q5 Under Hanafi jurisprudence, a guardian’s approval may validate a sale concluded by a discerning minor (Ṣabī Mumayyaz), but such approval does not necessarily validate the minor’s gratuitous transfer of his own property.
True
A discerning minor’s exchange transaction may be ratified because it can yield benefit, whereas a purely detrimental gratuitous disposal of the minor’s property is not validated merely by guardian approval.
Q6 According to Hanafi jurists, contractual declarations made through mistake or forgetfulness are legally ineffective because the necessary intention to create contractual obligations is absent.
False
The Hanafi view discussed in the book treats such declarations as legally effective to safeguard certainty in transactions; the majority position differs.
Q7 A contract may fulfill all the essential requirements of a Ṣaḥīḥ contract and still fail to produce immediate legal effects because its enforceability depends upon the ratification of an authorized person.
True
A Ṣaḥīḥ but Mawqūf (suspended) transaction has a lawful structure, yet its effects await the necessary authorization; ratification can make them operative.
Q8 In a Fāsid sale, even if the buyer takes possession of the goods with the seller’s permission, ownership cannot transfer until the cause of irregularity is removed.
False
Under the Hanafi treatment described in the book, possession with the seller’s permission can transfer ownership despite the Fāsid character of the sale; the irregularity still requires correction or dissolution.
Q9 When a seller offers a commodity for Rs. 100,000 in cash or Rs. 120,000 on credit, the transaction involves prohibited Gharar even if the buyer selects one price and both parties agree upon it before concluding the sale.
False
The two quotations are permissible alternatives before conclusion. The uncertainty is removed when one definite selling price and payment basis are agreed at the time the contract is concluded.
Q10 A sale may involve prohibited Gharar even when the subject matter is identified, its price is fixed, and the seller owns it, if the seller’s ability to deliver the asset remains uncertain.
True
Ownership, identification and price are not sufficient where delivery is materially uncertain; ability to deliver is an independent condition of a valid sale.
Q11 According to Hanafi jurisprudence, a buyer who purchases an unseen, individually specified asset may exercise Khiyār al-Ru’yah upon inspection, even when the asset fully corresponds to the description provided by the seller.
True
For an unseen, individually specified asset, the Hanafi option of inspection can remain available even where the asset matches the description; it is distinct from a claim about defective description.
Q12 Khiyār al-Sharṭ may be stipulated in a Salam contract for a maximum period of three days because Salam is a contract of sale and Islamic law recognizes an option of cancellation in sale transactions.
False
Khiyār al-Sharṭ is not allowed in Salam (or Ṣarf), despite its availability in certain ordinary sales. Its permissibility cannot be generalized to every sale type.
Q13 In Murābaḥah financing, once an Islamic bank purchases the asset requested by its customer, the customer’s earlier binding promise to purchase it becomes sufficient to establish the Murābaḥah sale without a fresh offer and acceptance.
False
A binding promise is not itself a sale. After acquiring the asset and assuming its ownership risks, the bank must enter a separate Murābaḥah sale with the customer.
Q14 In a Salam contract, specifying that the commodity must come exclusively from a particular farm does not affect the validity of the sale, provided the full price is paid in advance and the quantity and quality are clearly determined.
False
The Salam commodity must be described rather than restricted to the produce of a particular farm. Restriction to one farm creates delivery uncertainty if that crop is damaged or fails.
Q15 When a customer supplies cloth to a tailor and pays the tailor only for stitching a suit, the arrangement is characterized as Ijārah rather than Istisnā‘, even though the completed suit will be delivered later.
True
Where the customer provides the materials, the tailor supplies labor or services (Ijārah). In Istisnā‘, the manufacturer supplies the material and delivers the manufactured item.
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15 True/False questions · Mudarabah, Ijarah, Sukuk, Salam, Murabaha and more
Q1 Islamic banks allocate different weightages to different depositors, taking into consideration the amounts they maintain with the bank.
True
Islamic banks may use different agreed profit-sharing weightages for eligible investment deposit categories, considering factors such as the amount and tenure of deposits.
Q2 In the case of Car Ijarah, an Islamic bank can agree within the Ijarah contract to sell the car to the lessee.
False
The lease and sale must not be combined as one simultaneous contract. The bank may separately promise to sell the car and then complete a separate sale when the agreed conditions are met.
Q3 Investment deposits are guaranteed to be returned in full by the Islamic bank.
False
Under Mudarabah, an investment may suffer a genuine business loss. The bank does not guarantee the principal unless the loss results from its negligence, misconduct or breach of contract.
Q4 In a typical sale-and-leaseback Ijarah Sukuk structure, the originator takes the asset back on lease from the investors.
True
In this common structure, Sukuk holders own interests in an asset and lease it to the originator, who pays rent. Other Sukuk structures may work differently.
Q5 Financial Ijarah is permissible under Shariah provided legal ownership of the leased asset remains with the lessor, even though substantially all ownership-related risks and liabilities are transferred to the lessee.
False
Keeping the asset in the bank’s name is not enough. During an Islamic lease, the owner must bear ownership-related risks and costs. The customer is responsible for harm caused by misuse, negligence or misconduct.
Q6 Islamic banks accept current account deposits from their customers on the basis of Mudarabah and Musharakah.
False
Islamic current accounts are generally structured as Qard, a repayable loan. Mudarabah is normally used for investment accounts instead.
Q7 Fungibility is a necessary condition for goods that are the subject matter of a Salam contract.
True
Salam goods must be clearly describable by type, quantity and quality so goods meeting the agreed specifications can be delivered in the future.
Q8 According to the criteria established by the Shariah Advisory Council of Malaysia, the 25% tolerance benchmark represents the proportion of halal income in the total income of an investee company.
False
The historical 25% benchmark concerned certain non-compliant business activities, not the halal-income share. Malaysia’s screening benchmarks have since been revised.
Q9 A Mudarib has relatively limited financial liability but has an incentive to perform efficiently.
True
A Mudarib normally contributes management rather than capital and earns an agreed share of profit. Ordinary business losses fall on capital providers, while the Mudarib is liable for negligence, misconduct or breach.
Q10 A Mudarabah arrangement may involve more than one Rabb-ul-Maal, but there can be only one Mudarib.
False
There may be several investors (Rabb-ul-Maal) and several managers (Mudaribs) in a Mudarabah arrangement.
Q11 A Mudarib cannot claim any periodic salary or management fee if already receiving an agreed share of profit from the same Mudarabah arrangement.
True
For the same Mudarabah management work, the Mudarib receives the agreed profit share rather than an additional guaranteed salary. A genuinely separate service has to be considered separately.
Q12 Treating Islamic bank deposits as Amanah is a correct perception of their contractual nature under Shariah.
False
Pure Amanah means safekeeping. Banks normally use the deposited money. Current accounts are generally Qard and many investment accounts are Mudarabah, rather than pure Amanah.
Q13 Riba is not established merely because a lender receives more than the principal amount upon repayment, provided the additional payment is made voluntarily without any contractual obligation.
True
A borrower may voluntarily return extra as a gift of goodwill if it was not agreed, required or customarily expected as a condition of the loan.
Q14 In Murabaha financing, an Islamic bank may receive Urboun from the customer at the time of making a promise to purchase the asset.
False
Urboun is earnest money connected with a concluded sale. At the earlier promise stage, the bank may instead take Hamish Jiddiyah as a security deposit.
Q15 If a customer breaches a promise in Murabaha financing, the entire amount of Hamish Jiddiyah becomes the property of the bank, regardless of whether the bank’s actual loss is greater or smaller than the amount received.
False
The bank may recover only its actual loss caused by breach of a binding promise. If the deposit is larger than that loss, the remaining money must be returned.
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10 advanced case-based MCQs · Currency trading, hedging, possession and settlement
Q1 Mr. Ahmad maintains PKR 900,000 in his current account (CA) with IslamicFina Bank (IFB). On October 12, 2026, he requests IFB to credit his USD account with USD 5,000 at the prevailing exchange rate of USD 1 = PKR 280. IFB credits USD 5,000 to his USD account against PKR 1,400,000. Hence, FIB charges him PKR 500,000 by providing an interest-free credit facility, in addition to his available balance in the CA. Which of the following statements is NOT TRUE under the AAOIFI Sharīʿah Standards regarding the above transaction?
A. IFB executed a currency transaction exceeding the customer’s available funds by providing an additional credit facility of PKR 500,000.
B. Crediting USD 5,000 to the customer’s account on the same day does not necessarily make the transaction Sharīʿah-compliant.
C. Although IFB provided an interest-free credit facility, the transaction remains impermissible because the bank financed currency trading beyond the customer’s own funds.
D. The transaction is permissible because the customer contributed PKR 900,000 from his own funds, while the remaining PKR 500,000 was provided through an interest-free facility without any additional financial benefit to IFB.
D
The bank facilitated a currency purchase beyond the customer’s own funds using a credit facility from the same institution. This is prohibited even when the financing is interest-free.
AAOIFI Sharīʿah Standard No. 1, Clause 2/12/1
Q2 On January 01, 2026, a customer purchased an asset from Marhaba Islamic Bank (MIB) under a deferred-payment Musawamah contract, agreeing to pay USD 1,000 on March 31, 2026. Anticipating possible depreciation of the US dollar, MIB seeks to hedge its foreign exchange risk. The current exchange rate is USD 1 = PKR 276. Which of the following solution AAOIFI Sharī’ah Standard No. 1 suggests to hedge the risk?
A. MIB lends PKR 276,000 to Islamic Bank B, while Bank B lends USD 1,000 to MIB. Both loans are interest-free but contractually conditional upon each other.
B. MIB lends PKR 276,000 to Islamic Bank B, while Bank B independently lends USD 1,000 to MIB. Both loans are interest-free, repayable in their respective currencies, and involve no additional benefit.
C. By January 01, 2026, MIB buys a goods on deferred payment for PKR PKR 276,000 from Islamic Bank B that will be payable on March 31, 2026, to offset its potential devaluation loss in USD 1000 receiveable.
D. MIB lends PKR 276,000 to Islamic Bank B, while Bank B independently lends USD 1,000 to MIB. Both loans are interest-free, but Bank B agrees to compensate MIB for any exchange-rate loss.
B
Independent, interest-free loans in two currencies may be used for hedging if neither loan is conditional upon the other and neither provides an additional benefit.
AAOIFI Sharīʿah Standard No. 1, Clause 2/4/1
Q3 Case: Safa Islamic Bank (SIB) purchased GBP 6,200 from Gulf Commercial Bank (GCB) at an exchange rate of GBP 1 = USD 1.30, by September 21, 2026 and paid USD 8,060 immediately, and received a SWIFT confirmation marked “processed.” On September 22, the British pounds appeared as receivables in SIB’s records. SIB sold GBP 6,200 to a third party on September 22 and delivered them on September 23 upon receipt from GCB, within the customary settlement period. Which of the following statements is NOT TRUE under the AAOIFI Sharīʿah Standards?
A. The initial purchase is permissible despite the delayed transfer, provided the delay is consistent with prevailing currency-market practices.
B. The SWIFT confirmation and recognition of GBP 6,200 as receivables do not necessarily establish SIB’s right to dispose of the purchased currency.
C. SIB’s resale is permissible because the British pounds were delivered to the third party within the customary settlement period, even though the resale preceded their receipt.
D. The permissibility of a customary transfer delay does not automatically permit SIB to sell the British pounds before the original transfer becomes effective.
C
The bank sold the pounds before it had possession or the ability to transfer them to the buyer. Delivery the following day does not validate the premature sale, even within the customary settlement period.
AAOIFI Sharīʿah Standard No. 1, Clause 2/6/5(a)
Q4 IslamicFina Exports (IsFE) sold goods to an overseas company “Mamamiyya” on October 10, 2026 against deferred price for USD 20,000 payable on December 31, 2026. The current exchange rate was USD 1 = PKR 280. Fearing a decline in the value of the US dollar, IsFE entered into an agreement with Amanah Islamic Bank (AIB) to exchange USD 20,000 for PKR 5,600,000 delivered at spot on December 31, 2026. IsFE is supposed to deliver USD 20,000 by December 31, 2026. Which of the following statements is wrong regarding IsFE’s transactions under the AAOIFI Sharīʿah Standards?
A. The deferred-payment export sale and the currency exchange agreement are separate transactions; the permissibility of the former does not establish the permissibility of the latter.
B. The currency exchange agreement is permissible because both parties will exchange their respective currencies simultaneously on December 31, without any advance payment.
C. Fixing the exchange rate on October 10 for an exchange scheduled on December 31 constitutes a forward currency arrangement, notwithstanding simultaneous delivery on the settlement date.
D. The intention to protect the expected USD receivable against depreciation does not exempt IsFE from the Sharīʿah restrictions governing forward currency transactions.
B
A forward currency agreement remains prohibited where both countervalues are deferred, even when both are exchanged simultaneously on the future date. The hedging intention does not remove the prohibition.
AAOIFI Sharīʿah Standard No. 1, Clauses 2/2 and 2/3
Q5 On January 1, 2026, Marhaba Islamic Bank (MIB) executed a credit Murābaḥah sale of a certain asset to a customer for a deferred price of USD 1000, which was stipulated to be payable on March 31, 2026, and whereas the exchange rate between the USD and the PKR at the moment of contract formation was USD 1 = PKR 276, but on the aforementioned payment date the rate had allegedly appreciated to USD 1 = PKR 290, the customer now expresses a desire to discharge the obligation in Pakistani rupees rather than in the originally denominated, and the question arises as to which of the following arrangements is Shariah compliant:
A. The customer pays PKR 276,000 as a contractual right, because the Murābaḥah price was fixed at contract and later exchange-rate movement is irrelevant; the bank should record it as settlement of the original debt, not as a new ṣarf, so no spot possession is needed.
B. The customer pays either PKR 276,000 or PKR 290,000, at the bank’s sole discretion, because in a credit Murābaḥah the bank may choose the rate that avoids ribā al-faḍl, provided payment is not made in USD.
C. The customer pays PKR 290,000 (PKR 276,000 plus a PKR 14,000 for exchange-rate adjustment fee) because the total equals the payment-date value while the Murābaḥah price remains at the contract-date rate.
D. The customer pays PKR 290,000 on 31 March 2026, because the USD 1,000 obligation is converted at the payment-date market rate with no extra charge for delay and no deferment or rollover of the PKR amount.
D
A debt denominated in USD may be settled in PKR if the parties agree at settlement, use that day’s spot exchange rate and discharge the converted amount without deferment.
AAOIFI Sharīʿah Standard No. 1, Clause 2/5
Q6 On October 12, 2026, HIB purchased USD 7,500 from CB at PKR 288 per dollar, paid immediately, and received a SWIFT confirmation marked “processed.” On October 13, the dollars appeared as receivables in HIB’s records. HIB sold the USD 7,500 to a third party on October 13 and delivered them on October 14 upon receipt from CB, within the customary settlement period. Which of the following statement is not wrong as per AAOIFI Shariah standard?
A. The customary settlement period permits the initial transfer delay, but does not extend to HIB’s intervening sale of the receivable dollars.
B. Both transactions are permissible because payment was immediate and delivery occurred within the customary settlement period.
C. Both transactions are permissible because the SWIFT confirmation and receivables entry established HIB’s possession.
D. The purchase is impermissible because receipt was delayed, but the resale is permissible because HIB delivered the dollars upon receipt.
A
The initial bank transfer may take the customary settlement period, but the bank cannot dispose of purchased dollars before the transfer has become effective and it can actually deliver them.
AAOIFI Sharīʿah Standard No. 1, Clause 2/6/5(a)
Q7 On January 1, 2026, Marhaba Islamic Bank (MIB) accepted USD 1,000 in customer deposits, repayable on March 31, 2026. Anticipating depreciation of the Pakistani rupee against the US dollar, MIB seeks to hedge its foreign exchange risk. The current exchange rate is USD 1 = PKR 276. Which of the following hedging strategies is permissible under AAOIFI Sharīʿah Standard No. 1?
A. MIB sells goods on deferred payment for PKR 276,000, receivable on March 31, 2026, to offset its USD liability.
B. MIB purchases goods through deferred-payment Murābaḥah for USD 1,000, payable on March 31, 2026, to offset its USD liability.
C. MIB sells goods through deferred-payment Murābaḥah for USD 1,000, receivable on March 31, 2026, to offset its USD liability.
D. MIB enters into a binding forward currency-exchange contract to purchase USD 1,000 on March 31, 2026, at today’s exchange rate.
C
Creating a USD 1,000 Murābaḥah receivable payable when the USD deposit is due matches the bank’s dollar asset against its dollar liability and mitigates exchange-rate exposure.
AAOIFI Sharīʿah Standard No. 1, Clause 2/4/2
Q8 On April 15, 2026, Amanah Islamic Bank (AIB) purchased office equipment from a German supplier for EUR 4200, payable on July 15, 2026. The prevailing exchange rate was EUR 1 = PKR 322. AIB expects the euro to appreciate against the Pakistani rupee and wishes to protect itself against the resulting exchange-rate risk. Looking at risk hedging strategy, Which of the following option is not a right?
A. To manage this exposure, AIB, instantly, purchases a consignment of goods and sells it to a corporate customer through a deferred-payment Murābaḥah contract for EUR 4,200, receivable on July 15, 2026, to offset its EUR denominated liability.
B. To hedge its risk, AIB, instantly, issue an interest free loan of EUR 4200 to 3rd party which will be received by July 15, 2026, to payout the EUR denominated liability in time.
C. Options (A & B) are true
D. To mitigate this risk, AIB, instantly, accepts deposit EUR 4200 to offset the EUR denominated liability in time.
D
Accepting an additional EUR deposit creates a further euro liability rather than the EUR receivable needed to offset the existing liability. It is not an effective hedge; this does not make the deposit itself intrinsically prohibited.
AAOIFI Sharīʿah Standard No. 1, Clause 2/4/2
Q9 On August 10, 2026, Amanah Islamic Bank (AIB) and Barakah Investments (BI) established a Mushārakah arrangement to undertake Sharīʿah-compliant spot currency trading in USD and GBP. Under their agreement, AIB undertook to compensate BI for any losses resulting from exchange-rate fluctuations. Meanwhile, Tameer Foundation, an independent third party, voluntarily offered similar protection without being mentioned in the Mushārakah agreement. Which of the following statements is NOT TRUE under the AAOIFI Sharīʿah Standards?
A. AIB’s undertaking is impermissible because one Mushārakah partner cannot guarantee another against currency-trading risks.
B. Tameer Foundation’s voluntary guarantee is permissible because it is offered independently and is not stipulated in the Mushārakah agreement.
C. AIB’s contractual guarantee becomes permissible if it covers only exchange-rate losses and excludes other commercial losses arising from the Mushārakah.
D. The Sharīʿah permissibility of the underlying spot currency transactions does not automatically validate the guarantee provided by AIB to BI.
C
A partner cannot contractually guarantee another Mushārakah partner against currency losses merely by narrowing the guarantee to exchange-rate risk. A genuinely independent, voluntary third-party guarantee is distinguished from the partner’s undertaking.
AAOIFI Sharīʿah Standard No. 1, Clause 2/9/3
Q10 In a spot currency sale, both parties complete possession of only 60% of the respective countervalues at closing. The remaining 40% is not possessed. What is the status under Standard No. 1?
A. The entire contract is valid because the majority of both countervalues has been possessed.
B. The transaction is valid for the completed 60%, while the unpossessed 40% remains not valid.
C. The entire contract is invalid, including the portion whose possession has been completed.
D. The whole transaction is valid if the parties undertake to exchange the remaining 40% later.
B
Where corresponding portions of both countervalues have been taken into possession, that 60% is valid; the unpossessed 40% does not become valid merely because the rest was settled.
AAOIFI Sharīʿah Standard No. 1, Clauses 2/6/1–2/6/2
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