- Hawalah: transfer debt to a stronger payer.
- Refinancing via new Murabahah: create independent new financing.
- Charitable concessions: lender forgives part of debt voluntarily.
- Rescheduling without price increase.
Each tool has conditions and limits.
Restructuring Tool 1: Hawalah (Debt Transfer)
If Customer A owes Bank AED 1,000,000 and Customer A's parent company agrees to pay on behalf of Customer A, the bank can accept Hawalah. Once accepted, Customer A is discharged. Hawalah is discussed in detail in Section H.3.
Restructuring Tool 2: Refinancing (New Murabahah)
A solvent debtor can request a new, independent Murabahah financing. The bank purchases an asset and resells it to the customer at cost plus profit. If the profit is higher than the original debt, the new debt is larger, but this is permissible only when the new Murabahah is independent of the old debt, the customer takes real ownership and can dispose of the asset freely, and any use of proceeds to settle the old debt remains the customer's choice rather than a contractual condition. A short operational settlement window may be used, but the new contract must not require settlement of the old debt.
Restructuring Tool 3: Charity and Concession
The creditor can VOLUNTARILY forgive part of the debt as an act of charity (Sadaqah) or mercy (Ihsan). This is not a right of the debtor but a discretionary grace. Many Islamic banks have "debt forgiveness" policies for hardship cases, particularly to widows, orphans, or those affected by natural disasters.
Restructuring Tool 4: Rescheduling Without Price Increase
If a Murabahah customer requests a longer repayment period (extending the maturity), the bank can RENEGOTIATE without increasing the total price. For example: Original contract: AED 100,000 cost + 15% profit = AED 115,000, due in 12 months. Customer requests 24 months. Bank can renegotiate: AED 100,000 cost + 10% profit = AED 110,000, due in 24 months. The price is LOWER, but the payment period is extended. This is permissible as a business decision.
Key Restrictions on Restructuring
Key restrictions:
- Cannot increase price merely for extending time.
- Cannot stipulate that restructuring is a condition of the original debt.
- Cannot refinance an insolvent debtor on favorable terms when insolvency rules apply.
- Cannot use restructuring as a device for interest (Hilah for Riba).