Credit guarantee company, which provides guarantee scheme for Islamic banking, proposed to offer Islamic Direct Access Guarantee Scheme (Skim Jaminan Laluan Terus Secara Islam). The characteristics of this Scheme, are as follows:
- The amount of financing is within the prescribed limit by the guarantee company;
- Limit of guarantee period is prescribed between 5 to 8 years;
- The amount of fees is prescribed by the company;
- Guarantee coverage ranges from 30% to 100% of the total amount of financing;
- Processing charge (once) will be imposed; and
- Renewal charge will be imposed.
The credit guarantee will only cover Islamic financing offered by Islamic financial institutions to their customers. One of the Shari’ah issues in credit guarantee facility, as explained above, is whether the guarantee mechanism, in which the guarantor charges fee for the guarantee service provided is permitted by the Shari’ah.
The Council, in its 54th meeting, held on 27th October 2005 / 23rd Ramadan 1426 and in its 55th meeting, held on 29th December 2005 /27th Zulkaedah 1426, resolved that the above Islamic guarantee (by charging guarantee fee) mechanism provided by the credit guarantee company to the Islamic financial institutions offering Islamic financing products to customers is permissible.
Issuer: Shariah Advisory Council, Central Bank of Malaysia.