PROCRASTINATION, COMPENSATION, AND MORAL ECONOMY: A CIVILISATIONAL ANALYSIS OF TAʿWĪḌ IN ISLAMIC FINANCE

Abstract

This study critically examines classical and contemporary Muslim scholarly perspectives on compensation (taʿwīḍ) for procrastination in Islamic financing arrangements, with particular reference to its application in Islamic financial institutions. It aims to identify a Sharīʿah-compliant and ethically coherent approach that minimises juristic contention while preserving the moral foundations of Islamic finance. Adopting a qualitative research design, the study draws upon classical fiqh sources, contemporary academic literature, juristic resolutions, regulatory documents, and conference proceedings, analysed through a comparative and analytical framework.
The study finds that classical jurists of the Ḥanafī, Mālikī, Shāfiʿī, and Ḥanbalī schools unanimously rejected the imposition of additional financial penalties on debtors for payment delays. In contrast, contemporary scholarship is divided into three main positions: those who permit compensation, those who prohibit it entirely, and those who allow compensation on the condition that the proceeds are channelled to charitable purposes rather than retained as income by financial institutions. Building upon this third position, the study proposes the establishment of a tabarruʿ (donation) fund as a practical and ethically grounded mechanism. Under this model, a capable debtor who delays payment would contribute a voluntary donation to the fund upon settlement, while Islamic banks may recover demonstrable actual losses from the same fund.
The proposed framework seeks to reconcile Sharīʿah compliance with moral accountability, preserve the principle of risk-sharing, and prevent the commercialisation of penalties in Islamic finance. By situating taʿwīḍ within a broader moral-economic and civilisational perspective, the study contributes to ongoing debates on ethical governance and reform in contemporary Islamic financial practice.