Understanding Abyed in Islamic Finance: A Guide to Financial Guarantees

Abyed is a term used in the context of Islamic finance and refers to a type of financial guarantee or surety. It is a contractual agreement where one party (the guarantor) provides a guarantee to another party (the beneficiary) that they will fulfill certain obligations or repay a debt if the main obligor (the borrower) fails to do so.

In other words, abyed is a form of co-signing or joint and several liability, where the guarantor takes on the responsibility of repaying the debt if the borrower defaults. This can be useful for borrowers who may not have a strong credit history or collateral to secure a loan, as it provides an additional layer of assurance for the lender that the debt will be repaid.

Abyed is commonly used in Islamic finance transactions, such as murabaha (mark-up financing) and ijara (leasing), where the guarantor may be a third party or a group of individuals who are jointly and severally liable for the debt. The use of abyed can help to mitigate the risks associated with lending in Islamic finance, as it provides an additional layer of security for the lender.