Regulatory Alerts2025-01-24 | IFPD Circular No. 01Added · Updated
Adoption of AAOIFI Shariah Standard No. 31
AAOIFI adopts Shariah Standard No. 31, titled 'Controls on Gharar in Financial Transactions,' with specific clarifications and amendments added as footnotes to each clause. The standard defines Gharar as uncertainty in contract results, categorizing it as excessive, medium, or minor, and establishes that excessive Gharar in exchange-based contracts invalidates the agreement. It prohibits contracts involving ignorance of the commodity's essence, type, quantity, or price, as well as sales of nonexistent or unpossessed goods. The standard permits certain degrees of Gharar in security contracts like Rahn and Kafalah, while specifying conditions under which Gharar in contract terms, such as unlimited cooling-off options, renders a contract invalid.
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