1. Assoc Prof Dr Azman Mohd Noor,
Hibah Mu‘Allaqah (Conditional Gift) and It’s Application in The Distribution of Takaful Benefits and Marketing Incentives
THE 3RD IIUM – KYOTO UNIVERSITY RESEARCH COLLOQUIUM Theme: Understanding Shari’ah and Its Application in Construction 2nd & 3rd December 2015
Assoc Prof Dr Azman Mohd Noor,
Institute of Islamic Banking and Finance, International Islamic University Malaysia

2. Introduction
The concept of conditional hibah as an alternative instrument to resolve some issues in takaful, i.e the basis for paying takaful benefit absolutely to the nominated nominee as suggested by the new Islamic Financial Service Act in Malaysia There has been a dispute among some contemporary scholars whether this practise is in line with Shariah since the takaful participants do not own the benefit during his life time as it does not exist yet. Another issue is about the marketing strategy which is mostly used to market takaful products. There were questions regarding the justifications to reward the agents at multiple levels despite of the fact that some might put more efforts and works to get customers.

3. Definition of Hibah Mu‘allaqah and the Juristic Opinions:
According to juristic scholars, hibah is defined as “tamlik al-‘ain bi dun ‘iwad”, which means transferring ownership without any consideration (Al-Sharbini, Mughni al-Muhtaj, Dar al-Fikr, vol.2, p.396). Hibah mu‘allaqah or ta‘lik al-hibah is a conditional gift that is subject to the happening of a particular event. Generally, with reference to this type of hibah, its contract is only valid and binding once the conditions are fulfilled.

4. validity of conditional hibah
There are different opinions between Muslim jurists on the validity of conditional hibah, and it can be divided into two (2) major opinions. First Opinion: The Advocates of Hibah Mu‘allaqah This is the opinion of Maliki, Hanafi and some of the Hanbali schools of thought, specifically the opinion of Ibn Taimiyah and his disciple Ibn al-Qayyim. Both of them were of the opinion that conditional hibah is binding upon the fulfilment of its condition

5. Firstly, the opinion of Hanbali school of thought is clearly stated in the book “al-Insaf” which narrates the opinion of Imam Ahmad: “It is considered valid if a husband and wife paid (gave hibah) to one another with a condition that the husband should not marry a second wife but, if the condition is not fulfilled, the hibah cannot be claimed, (hence, the husband is not entitled to get the hibah). This is because the hibah is conditional which lapses in the absence of the fulfilment of the condition”.

6. Ibn Qayyim asserted that, there is a clear evidence that proves the Prophet (peace be upon him) made a conditional hibah, by referring to the following Hadith which was narrated by Jabir:
قال : لو قد جاء مال البحرين لأعطيتك هكذا وهكذا ثم هكذا ثلاث حثيات . وأنجز ذلك له الصديق رضي الله عنه لما جاء مال البحرين بعد وفاة رسول الله صلى الله عليه وسلم.
Meaning:
(The Prophet) said “If the wealth (disembarks) from Bahrain, I will give you such and such amount (of money), with three grasp”. Abu Bakar al-Siddiq fulfilled the promise of the Prophet (peace be upon him) (after the demise of the Prophet) to give hibah after the occurrence of the condition, when the wealth from Bahrain arrived

7. on the act of the Prophet (peace be upon him) himself who has executed conditional hibah as a promise. On another occasion, the Prophet (peace be upon him) had sent perfume as a present to al-Najashi (King of Ethiopia), and he said to Ummu Salamah: “Indeed, I gave away to al-Najashi clothes and perfumes, but I think he had passed away. And I think that the presents will be sent back to me. If the presents are returned to me, they will be yours. Therefore, by referring to the above discussion, it can be seen that the preferred opinion to Ibn Qayyim who allows conditional hibah is valid based on the previous two ahadith

8. Secondly, the opinion of Ibn ‘Abidin from the Hanafi school of thought who said:
امرأة تركت مهرها للزوج على أن يحج بها ، فلم يحج بها : قال محمد بن مقاتل : إنها تعود بمهرها ؛ لأن الرضا بالهبة كان بشرط العوض ، فإذا انعدم العوض انعدم الرضا ، والهبة لا تصح بدون الرضا.
“A woman had left her dowry to her husband (as hibah), but with a condition (in return) her husband must perform pilgrimage (Hajj) together with her, but her husband did not fulfill the condition (perform Hajj together with her). Muhammad bin Muqatil said: “Indeed, her hibah (is cancelled) becomes her dowry, this is because her gift is conditional to taking her for hajj, when there is no such performance, the offer is in absence of consent, and such kind of hibah is considered void without consent”.

9. there is a legal maxim attributed to the Hanafis which goes as follows:
"المواعيد بصورة التعاليق تكون لازمة“
Meaning: “Promises in the form of ta’lik is binding”.
Thirdly, according to Maliki school of thought, hibah with conditions to be fulfilled in future is binding due to the reason that ambiguity (gharar) does not affect the validity of hibah contract. Ibn al-Rusyd mentioned that:
ولا خلاف في المذهب في جواز هبة المجهول والمعدوم المتوقع الوجود فتصح هبة الثمرة بعد بدو صلاحها
“There is no difference of opinions in Maliki school in permissibility of hibah majhul (giving away something unknown) and hibah al-ma ‘dum (giving away something that is not in existence) with the expectation to exist in the future. For this reason, it is valid to give away fruits which start to ripe.

10. Second: The Opponents of Hibah Muallaqah.
This is the opinion of Syafie jurists and some of the Hanbali and Zahiri jurists. According to Syafie school, hibah with any conditions in the future is not binding as hibah is a contract that will become invalid because of jahalah (ignorance). Consequently, hibah cannot be made conditional (to certain event in future) and this is similar to the prohibition of conditional sale contract (to certain occurrence in future).

11. Ibn Hazm, one of the prominent scholar of Zahiri school of thought also said that: “Hibah contract, in its nature, is a contract that cannot be made conditional”.
Ibn Qudamah of Hanbali school mentioned:
"لا يصح تعليق الهبة بشرط : لأنها تمليك لمعين في الحياة ، فلم يجز تعليقها على شرط ، كالبيع"
“Hibah contract which is conditional to terms is void because hibah is a giving of ownership (transfer of ownership) to a specific beneficiary in his life, thus, hibah cannot be conditional like sale contract (which cannot be conditional)”
However, Al-Bahuti argued that in the above situation, hibah is valid and ownership is legally transferred from the benefactor to the beneficiary of hibah, but the condition is void (ineffective)

12. Characteristics of Hibah Mu‘allaqah:
1- Hibah mu‘allaqah is not considered as a contract of exchange but still in the realm of the contract of tabarru‘ (gratuity). 2- Hibah mu‘allaqah is considered as binding when the conditions or terms are fulfilled as per the opinion of Hanafis and Malikis. 3- Hibah mu‘allaqah is considered similar to a promise from one party. It is a promise to give away something, but not a promise to engage in a contract of exchange (sale contract) in future. Most of the contemporary scholars allow the practice of promise from one party (unilateral) and regard it as binding. This is in accordance with the resolution of Fiqh Academy (Majma Fiqhi), and AAOIFI standards.

13. Proposed Guidelines for HibahMu‘allaqah
1- Hibah mu‘allaqah cannot be used for the purpose contradicting to Shariah or prohibited transactions such as a deception that will lead to riba (interest). 2- Selling of hibah mu‘allaqah to the third party is not permissible. 3- Hibah mu‘allaqah shall not be contradicting to the substance of hibah (muqtada hibah) such as tamlik ‘ala wajh al-ta‘bid (transfer of ownership forever without time constraint). 4- Hibah can only be binding upon the deceased of the benefactor, and it will be considered as a will (wasiyyat).

14. Application of Hibah Mu‘allaqah inTakaful Industry
1- Nomination of Takaful Beneficiaries
A question arises whether the takaful beneficiaries in family takaful are only entitled to the takaful benefits similar to tarikah (inheritance) which is subject to Islamic laws of faraidh, or is it permissible to give the takaful benefits to a sole individual beneficiary as being practiced in conventional insurance when the policy holders pass away.
To explain the concern of ownership over takaful benefit, there is a need to find out how ownership can be established from Shariah perspective

15. Contemporary Islamic Rulings (Fatwa) that Allow the Takaful Benefits to be given to the Sole Beneficiary
(A) Fatwa Nadawat al-Barakah for example, states as follows: “It is permissible to distribute the (takaful) death benefit according to the law of mirath (Islamic law of succession), as it is also permissible to distribute the payment to a particular individuals or parties as specified by the participant on the basis that the benefit is the contribution of other participants to the beneficiary as specified by the participant and not his estate”

16. (B) Shariah Advisory Council of Bank Negara in its 34th meeting held on 21st April 2003 resolved: i-Takaful Benefit can be used as hibah since it is the right of the takaful participants. Therefore, the takaful participants should be allowed to exercise their rights according to their choice as long as it does not contradict with Shariah. ii- The status of hibah in takaful plan does not change into will (wasiyyat) since this type of hibah is a conditional hibah, in which hibah is an offer to the recipient of hibah for only a specified period. In the context of takaful, the takaful benefit is both associated with the death of the takaful participant as well as maturity of the takaful certificate.

17. iii- A takaful participant has the right to revoke the hibah before the maturity date because conditional hibah is only deemed to be completed after delivery is made (qabadh). iv- Takaful participant has the right to revoke the hibah to one party and transfer it to other parties or terminate the takaful participation if the recipient of hibah dies before maturity V- The takaful nomination form has to be standardized and must stipulate clearly the status of the nominee either as a beneficiary or an executor (wasi) or a trustee

18. Shariah Issues in Giving the Takaful Benefit (Hibah) to a Sole Beneficiary
There are a number of unsettled issue over sole beneficiary, among others: 1- How to make hibah of something which is not yet realized i.e. there will be no death benefit if the takaful participant is alive until the maturity of the takaful certificate? 2- If it is a hibah, can the takaful participant retract the hibah because he/she takes the takaful plan for his/her own benefit upon maturity? 3- In a valid hibah, the ownership is transferred to the recipient. What if the recipient dies? It becomes his/her estate. Can the recipient be replaced?

19. 4- If a husband is paying a takaful plan for his wife, can he be the recipient of the takaful benefit or he can only be a trustee/executor 5- Hibah which is tied up with death is a will (wasiyyat). It is not allowed to make wasiyyat to the inheritor (waris). Another issue is that, it may not serve the purpose of taking protection to a particular recipient. 6- How far the procedure is recognized by the law?

20. Recommendations and Suggestions
This paper proposes a solution where the takaful participants can give suggestions regarding the names that they want to put as beneficiaries, but conditional hibah (hibah mu‘allaqah) is coming from other takaful participants, in which all of them agreed upfront to make such a hibah contingent on the occurrence of the event of peril. The conditional hibah will be executed by the Takaful Operator as the appointed agent. If there is a death case, the participants we will give the takaful benefit to the selected beneficiaries nominated by the participant/policy holder.

21. The Ta‘lik ( condition) here is upon participant/policy holder’s death, the takaful benefit (compensation money) derived from the tabarru‘ fund will be paid to the definite beneficiaries only as recommended by the takaful participant. The nominee that has been chosen by the takaful participant among the beneficiaries is not receiving a hibah from the takaful participant himself, but from all takaful participants. To avoid confusion, hibah mu‘allaqah is handled by the takaful operator as an agent to the other takaful participants via tabarru‘ fund. It is suggested to differentiate between tabarru ‘ fund and personal investment fund. The proceed from personal investment fund should be treated as the estate of the deceased and should be subject to the rules of al-faraid.

22. Marketing Takaful Product through Multi Level Agency
The role of agency cannot be denied in marketing takaful products. Most of the takaful operators depend on the agents to promote and market their takaful products. it is observed that the industry cannot survive without this marketing platform. Shariah issues raised by many: is it permissible to the agent to get the reward or privilege in a form of ju`alah, as there is no effort done so much by the upper liner, i.e. the higher rank of agency. The manager of Agency Group sometimes do not involve in monitoring the works of his agent under his supervision

23. Should there be incentives or commissions paid to the agents at all levels? The practical alternative to resolve the issue of giving commission on the overriding basis can be hibah mu‘allaqah. For example: “You will receive payment in this or that amount only if there is a payment being made from the participants registered under your name or your underliners/subbordinates”. It is noteworthy that conditional hibah or hibah mu‘allaqah is more appropriate compared to ju‘alah or performance incentives. This is because ju’alah is applicable to the offer which involves efforts and good performance which is a condition to getting the rewards, whereas in the case of conditional hibah, that requirement can be tolerated.

24. * Up until 110% fees payment for the 20-year policy and above
* For policy below 20 years commission will depreciate based on the policy’s period

25. Conclusion
In conclusion, as for the issue of the distribution of takaful benefit, it is suggested that in the case of nominated sole beneficiaries for the takaful benefit derived from the general tabarru‘ fund, it is permissible. There are some similarities in the takaful case, in which the conditional hibah is taken from tabarru‘ fund. Based on this evaluation, it is more defined to describe the above muamalat as hibah mu‘allaqah from tabarru‘ fund, through the management of the takaful operator, and on behalf of all the takaful participants to give financial assistance in the form of takaful benefits to the beneficiaries, in accordance with the list of nominees that have been suggested by the takaful participants.
On the other hand, the proceeds form the personal investment fund is considered as an inheritance from the deceased which should be distributed according the rules of al-farai’d.

26. As for the multiple level takaful marketing strategy, it is argued that conditional hibah is the suitable principle for multiple level commissions for the agents who market the takaful products, provided that the payment comes from the Takaful Operator. The Shariah concern on the validity of the incentive payment is justified with the unilateral tabarru‘ embedded in the nature of conditional hibah.