Al-Wakalah

Content
• DEFINITION
• EVIDENCE
• PILLARS OF AL-WAKALAH
• TYPES OF AL-WAKALAH
• CONDITIONS OF AL-WAKALAH
• MODERN APPLICATION
 Definition
• Literally -Agency, representation, proxy, mandate,
authorization, delegation, empowerment etc.
• Technically: The appointment of someone to take over the
appointer’s affairs on his/her behalf for the purpose of
accomplishment of certain tasks Wakalah implies a kind of
delegation by a person of his business to act on his behalf.
• It is lawful if a person appoints another as his
representative for selling or buying, letting or hiring, giving
or taking a pledge for depositing or receiving a gift, for safe
keeping, for making a compromise, and for giving an
acquaintance and for making an admission etc.
 Legality
• Al-Quran -Surah Al-Kahf 18:19
• “Let, then, one of you go with these silver coins to the town, and let
him find out what food is purest there, and bring you thereof [some]
provisions.
• Hadith: Reported by Urwah R.A that the prophet S.A.W gave him
one gold Dinar to buy with it (be an agent for the Prophet S.A.W) a
sheep but instead he managed to buy two sheep. He then sold one
of it for one gold Dinar and then presented the prophet with both
the sheep and one gold Dinar that he acquired. The prophet S.A.W
prayed for him to be given blessings (barakah) in all his trade and
transactions and mentioned that even if he sells solid soil, he will
definitely gain profit in it. Reported by Abi Hurairah R.A to the
effect that: the Prophet S.A.W had sent Umar R.A to be his agent in
Zakat collection (representative in zakat collections)
• Reported by Sulayman bin Yasar that: The prophet S.A.W
sent Abu Rafi’ and a man of the Ansar to accept (Qabul)his
S.A.W marriage to Maimunah binti al– Harith on his S.A.W
behalf while he was in Madinah before he had left for Hajj
(representative in Marriage)
• Ijma’: The ummah had came to a consensus on the
legitimacy of Wakalah contract since there is a great need
for it, and individuals are also not capable of catering and
handling all his/her needs, matters and daily affairs on their
own without having to resort for the help of other people.
• Hence, it is permitted because it is one of the types of
cooperation on good deeds and fear of God ( Ta’awun Alal
Birri Wa Taqwa ) encouraged in Islam.
 Pillars of al-Wakalah
• 1. Wakil -The authorized agent,
representative, proxy, trustee
• 2. Muwakkil. Authorizer, mandatory, client,
principal
• 3. Muwakkal Bih -Things or subject matter
that is being entrusted for, or the business
deals involved
• 4. Sighah -Ijab (Offer) and Qabul (Acceptance)
 Types
• 1. Wakalah Mutlaqah -Unlimited Agency/ Unrestricted
Wakalah
• A Wakalah contract that is not restricted to any
conditions except for those that are permitted in Islam
• Not confined to certain circumstances or time limit.
• 2. Wakalah Muqayyadah- Limited Agency/ Restricted
Wakalah
• A Wakalah contract that is restricted or confined with
certain conditions that are legitimized by Islam
• Bounded by special circumstances or time limit
 Conditions
• Conditions related to contracting parties –
• The agent must be someone that is capable of performing the
responsibility and fulfill the minimum requirement (being sane, adult and
smart)
• The authorizer has the freedom to terminate the contract or the service of
the agent and the agent could also withdraw from the contract
• Except if the responsibility of the agent towards the other party is still
pending or his obligation towards the other party has yet to be fulfilled.
• Principle should know the agent, either by name or physical appearance,
vice versa.
• It is legal to entrust certain business dealings to an agent even if the
authorizer is capable of performing the same deal himself.
• The Wakalah contract ends with the accomplishment of the entrusted
tasks or mission
 Conditions
Conditions related to the object of agency contract
The subject matter or business dealings must be clearly specified in
the contract by the authorizer.
The object of an agency contract should be eligible for legal
authorization. It is not permissible to conduct Wakalah for physical
prayers since the objective behind these prayers are to test and act
as trials to the believers with the exception of certain prayers such
as the Pilgrimage (Hajj), slaughtering animals for sacrifice (Qurban),
distribution of Zakat, and fasting of Kafarah (on behalf of the dead)
The entrusted agent will not be held responsible for any damage or
disruption of the business deal except for cases of proven
negligence or ignorance on part of the agent
The agent is not permitted to act beyond what he was entrusted for
by the authorizer in the first place except if it is an unlimited agency
( Wakalah Mutlaqah ).
 Wakalatul Istithmar
• A method (Arabic for ‫ ) وكالة االستثمار‬whereby Islamic financial institutions manage
funds on behalf of their customers. This involves providing agency (wakalah)
services against specific fund management fees. These fees are typically pre-
agreed and don’t vary with the profit and loss associated with the managed funds.
The fees may be fixed (charged as a lump sum amount) or a percentage of
invested funds or their net asset value. For instance, an Islamic bank may agree
with a customer that in return for its agency services, it will receive, at the end of
every financial year, 3% of the net asset value of the funds provided by the
customer. In wakalah structure, the investment agent (the bank) can deduct its
fees from the fund no matter how the amount of profit or loss turns out to be.
• Wakalatul istithmar functions in the same way as mudaraba, except that the profit
in mudaraba is divided between the parties according to pre-defined percentages,
while in wakala the agent (investor) receives only the agreed ratio in return for its
efforts and expertise.
• Wakalatul istithmar is also spelled as wakalah bil istithmar.
 Modern application
• In the contemporary application, wakalah
contract is widely used in structuring various
Islamic banking, capital market and takaful
fee-based products.
• Application of wakalah contract includes:
• Wakalah bi al-istismar (agency for investment)
• Sukuk
• Letter of Credit (LC)
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