Wakala

The meaning of Wakala is agency or delegated authority where the principal appoints an agent to carry out a specific job on behalf of the principal. The principal provides the capital whereas the agent provides expertise or labor. Under wakala, the capital provider receives the profit from the venture whereas the agent may get a fixed remuneration along with an incentive (if any) against the services rendered.

Business Need

Wakala is one of the most flexible short-term financing products as it can be utilized to facilitate payment related to procurement, manufacturing and sale of goods.

Essential Shariah Requirements

1. The amount paid out as wakala Investment can be used for payment of raw materials, overheads, wages, transportation or for any other short-term use.

2. The Wakala Investment Amount may be paid in advance or deferred or paid in installments. The payment of wakala Investment can also be connected with the stage of completion of the work.

3. The task assigned to the Wakil by Muwakkil under wakala must be clearly defined and must be within the legal, ethical and shariah boundaries.

4. It is a requirement that the price for a Wakala contract be known at the conclusion of the contract.

5. The results of the contract (like transfer of ownership and entitlement to the consideration) belong to the principal. However, the rights arising from contract (like pursuit of payment and litigation) belong to the agent.

6. Wakala Financing will be settled through the sale proceeds received by the sale of the wakala goods.