BANKING GENERAL KNOWLEDGE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Al wakalah
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Al kafalah
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Wadiah
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Tawarruq
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Detailed explanation-1: -It is a guarantee issued by the Bank to the Beneficiary (contract awarder/third party) where the Bank undertakes to pay the Beneficiary an agreed sum if the Customer defaults in fulfilling the obligations with the Beneficiary.
Detailed explanation-2: -Legally, kafalah means the joining of one obligation to another with regard to the settlement of a claim. In kafalah, a person joins another in undertaking a certain obligation. Consequently, both persons become jointly liable for the settlement of the same obligation.
Detailed explanation-3: -Kafalah is a unilateral contract of guarantee where one party agrees to stand in the place of a debtor before his or her creditors. The concept can be explained by using a simple example involving three parties. Islamic banks are able to offer letters of guarantee under the concept of kafalah.