The Impact of the Juristic Characterization Change of the Letter of Guarantee on Contemporary Applications in Jordanian Islamic Banks

Abstract

This study aimed to demonstrate the impact of the change in the juristic characterization (takyeef fiqhi) of the letter of guarantee on contemporary applications in Jordanian Islamic banks.

The study adopted the inductive and analytical approach; it was divided into three sections covering the concepts and juristic characteristics of the letter of guarantee, its classification among jurists, and finally analyzing contemporary applied models in Jordan Islamic Bank and Islamic International Arab Bank.

 The study found that the letter of guarantee remains a guarantee (kafalah) even if fully covered; therefore, it is prohibited to charge a fee for the guarantee process itself, while the bank is permitted to charge a commission for agency (wakalah) services in payment or to cover the actual administrative expenses for issuing the letter.

The study concludes that Jordanian Islamic banks follow a balanced approach that combines Shariah controls and practical needs by characterizing the letter as a legitimate guarantee supported by a paid agency, ensuring the compatibility of the approved models with the objectives of Shariah in protecting rights and facilitating contemporary financial transactions