Glossary
Hawalah
Transferring a debt from one person to another, so a different person now owes it.
حوالةḥawālah
Hawalah is the assignment of a debt: the original debtor's obligation is transferred to a third party who becomes liable instead. AAOIFI covers it in Shariah Standard No. 7. It matters on cards because the card scheme's settlement chain, where the issuer pays the acquirer who pays the merchant, has been analysed by different scholars as hawalah, as kafalah or as wakalah, and which analysis you accept changes what fees the issuer may charge you.
Related terms
KafalahA guarantee: one person promising to cover another person's debt if they do not pay.WakalahAgency: appointing someone to act on your behalf, and paying them for it if you agree to.DaynA debt: money you owe to somebody.MuqassahSet-off: cancelling what you owe against what you are owed, so only the difference is paid.
Sources
- AAOIFI Shariah Standard No. (7)