Wakalah Agreement

Wakalah is one of the contracts used by banks when depositing. In this agreement, the Islamic bank is mandated by the client as an agent (Wakil) to invest customers` money in various protocols and companies compliant with Shari`ah. With respect to the investment aspects in which the client expects a return in the company imposed by the contract, the profits and losses belong exclusively to the client. This agreement is for a known transaction. Example: the agent is required to sell or buy a house or private car. The word “wakalah” literally has several meanings, including support, delegation, authorization, retention and execution of a task on behalf of others. Technically, Wakalah refers to a type of contract whereby one person (the captain) assigns another person to perform certain tasks for him. In other words, it is an agency contract that authorizes an agent to perform and manage certain cases on behalf of a client. There are two contractors in the Wakalah contract: the client (aka muwakkil) and the agent (also called Wakeel). In essence, Wakalah is a kind of responsibility, while the officer must carry out his delegated duties in the way the agent assumes his responsibilities. Muslim scholars have reached the consensus on Wakalah`s admissibility on the basis of evidence from the Qur`an and the Sunna of the Prophet Muhammad (peace be with him).

This is because people need help with certain tasks that they are not able to do themselves. The main purpose of an agency contract (Wakalah) is to facilitate economic exchanges and transactions between a client and third parties if the client is unable to do so personally or if he is not willing to work himself. Similarly, the agency contract is necessary because, on several occasions, the client does not have the knowledge, expertise or time to perform certain tasks. In such a situation, he must delegate someone who performs certain tasks on his behalf. For example, a real estate agent is responsible for selling or buying a particular property on behalf of the client.