Pre Signing

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PRE SIGNING AND SEQUENCE IN CONTRACT EXECUTION OF ISLAMIC BANKING PRODUCTS

By

Assoc Prof Dr Asmadi Mohamed Naim

ABSTRACT

Pre signing of all transactional documents in one sitting by the customer is among the issues that is questionable as it does not follow the sequence in Shari'ah concept of 'offer and acceptance'. As 'offer and acceptance' or 'ijab' and 'qabul' i.e. sighah in popular juristic view is an absolute, and executed only after the possession of the contracted item, pre signing in normal circumstances has been seen as a promise from one party to purchase or to sell. Hence, the question that arises from such a practice is whether the promise can be considered an 'offer' or 'acceptance', or not? Any compliant issues in contract execution will affect the validity of the contract. Therefore, this study aims to discover a few objectives such as the Shari'ah view on sequence of contract execution in Islamic banking products; and Islamic banks' practices in executing contract in vehicle financing, house financing and personal financing. The paper also discloses Islamic views on contract execution and how Islamic banks practice contract execution with customers. The paper suggests that the offer and acceptance should be done in a proper manner as described by Islamic jurists where technology devices and communication technology should be used to overcome pre-signing needs.

Keywords: Pre-signing, sequence of contract, Islamic banking product, Shari’ah

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1.0 Introduction

As Islamic banking is moving towards a maturity phase, there are many calls from various quarters that Islamic banking must move towards fulfilling the objective of Shari’ah (maqasid) instead of just fulfilling the contractual element of the transaction. Although the Shari’ah Committee (SC) is a compulsory element in Islamic financial institutions, there is still a lot of confusion in terms of how the institutions have harmonized Shari’ah pronouncements with their practices. Hence,...