Debt assignment, or bay' al-dayn, is the transfer to a third party of the right to collect a debt; Islamic finance accepts it only at face value, because selling a monetary claim for a smaller amount amounts to an interest-bearing loan.
Why reselling a debt at a discount is refused
A claim of 100 payable in a year, bought for 92 today, means advancing 92 to recover 100: that is precisely the interest on a loan. Classical jurists treat it as riba al-nasi'a, so most schools prohibit the commercial discounting of receivables.
Transfer at par: the only cash assignment allowed
A creditor may assign a claim for its exact amount, with neither gain nor loss, for instance to a partner or to the buyer of a business. Such a transfer creates no time-related benefit and resembles a settlement more than a sale.
Swapping a debt for goods instead of money
Several jurists accept that the holder of a claim exchanges it for a specified asset delivered on the spot, which avoids a deferred exchange of money for money. The asset's value must be clearly set, and its delivery cannot itself be postponed.
Early settlement rebates: a gesture, not a clause
The principle of reduce and pay sooner (da' wa ta'ajjal) remains debated. Common standards let a creditor grant a voluntary rebate (ibra') to a debtor who repays early, but many boards refuse to see that rebate promised in the original contract.
Islamic factoring: working around discounting
A company wanting early cash from its invoices cannot sell them at a discount. Instead it combines a paid collection mandate (wakala bi al-ujra) with an interest-free advance (qard) repaid from collections, the fee covering only the service actually performed.
Why the fee must not track the amount advanced
If the agent's remuneration rises with the sum lent or with the length of the advance, it becomes disguised interest. Sharia boards therefore require the fee to reflect management and chasing work, and to be charged even when no advance is made.
Hawalat al-dayn, a close relative of assignment
In an assignment the creditor changes; in a hawala it is the debtor who is replaced by a third party agreeing to pay. Both mechanisms move a debt without selling it, but their consent requirements and rights of recourse differ.
Points to check in an assignment agreement
The agreement should state where the claim comes from, its exact amount, the absence of any discount, how late-payment penalties are handled and who bears the insolvency risk. Any return guarantee offered to the assignee deserves close scrutiny by the Sharia board.
Securitising receivables: the tangible-asset rule
A sukuk backed solely by murabaha receivables cannot trade above or below par. Issuers therefore blend receivables with real assets, such as property leased under ijara, so that the pool remains mostly tangible and can be freely traded on the market.
Tangibility threshold: a figure each board sets
The minimum share of real assets required varies between authorities and boards, some accepting a simple majority. Investors should check the ratio at issuance and also how it is monitored when assets are repaid during the life of the sukuk.
Bank liquidity: the puzzle of non-tradable claims
An Islamic bank whose balance sheet is full of murabaha receivables cannot sell them at a discount to raise cash, nor place them in a conventional repo. It therefore relies on eligible sukuk and on tailored facilities offered by some central banks.
Assignment under civil law and the Islamic contract
Under English and French law, a receivable can generally be assigned at any agreed price. A Sharia-compliant contract sits within that legal framework but voluntarily adds the ban on discounting and full transparency about the risk being transferred to the assignee.
Specialist external source
The Bank of England explains its approach to Islamic banks, including the liquidity constraints they face when their assets are non-tradable receivables.