This study deals with the Islamic figh methods concerning the doubtful debts issue affecting a considerable number of the contemporary financial institutions , with special concentration on the penalty clause applied by many contemporary laws, as when the creditor agreed to receive a Surplus payment from the debtor if the later fails to repay him on due time.
The Study shows that such clause is illegal if related to the debts and the surplus payment received by the creditor himself, because such action is considered no more than usury.
However the Surplus payment can be made to a welfare body, such as the poor.
The creditor also may enforce a clause that requires payment of the remaining installments if the debtor fails to pay any of them on due time. He also may enforce a clause that requires the debtor to subscribe in a mutual insurance fund, in order to protect his right, if the debtor fails to repay him.
Shebair, prof. Dr. Mohammad Othman
"Protection of debts under Islamic Jurisdiction- صيانة المديونيات ومعالجتها من التعثر في الفقه الإسلامي,"
Journal Sharia and Law: Vol. 1996
, Article 1.
Available at: https://scholarworks.uaeu.ac.ae/sharia_and_law/vol1996/iss10/1