In Islamic Finance, the term wakala describes an agency or delegated authority in which a muwakkil (captain) appoints the Wakil (agent) to perform a specific task in the name of the Muwakkil. This agreement is for a known transaction. Example: the agent is required to sell or buy a house or private car. Investors are encouraged to consider this risk when investing their funds in the United Arab Emirates, as part of a wakala agreement, without the laws of the remote insolvency trust. 3. The investment is used by the agent to acquire the selected assets from one or more sellers; In Wakala contracts, the actual profit is distributed according to the pre-agreed profit rate. The bank (Wakil) is able to specify the expected return on customer input by investing in selected instruments for an agreed wakil fee. The Wakil will then make the investment to generate a realized return for and on behalf of customers (Muwakkil). Muwakkil indicates the expected returns on the investment and Wakil must secure an investment to obtain the expected returns after deducting Wakil`s fees. Profits above agreed returns are retained by Wakil as an additional incentive. Like any other investment, Muwakkil bears all risks and losses, except for risks and losses resulting from Wakil`s fault or negligence, in the event of a delay. The structure of the Wakala contribution is presented in the chart below In a financial context, the investor appoints the agent to invest the funds made available by the investor in investments or assets, and the agent gives him expertise and manages those investments on behalf of the investor for a certain period of time in order to obtain an agreed return. Many Wakalas provide that the current laws of the treaty are the laws of the United Arab Emirates, as these laws are not in contradiction with the provisions of the Islamic Shari`a.
We note that this can create some confusion in the event of a dispute if an act has been considered illegal or unable under UAE law, but a Shari`a Board declares it valid and lawful or vice versa. The evidence of the Shari`a scholars should help the court determine whether an agreement was in compliance, but ultimately it will be up to the courts to decide the case. It will be difficult to have both the laws of the United Arab Emirates and the principles of the Islamic Shari`a to govern a Wakala agreement. The dynamics between law and doctrines are complex, but it is clear that the laws in force are established, while fatwas are issued by shari`a scholars in relation to a particular agreement and may vary from one shari`a board to another and from one agreement to another. As part of a Wakala agreement, Muwakkil and Wakil share both the profit and the risk of loss. The expected benefits, which are indicated in a Wakala agreement, are only indicative and are not a guarantee of return. If Wakil makes a profit up to the due date, the winnings are shared with the Muwakkil in pre-agreed proportions.