Kafalah Rail

Guarantee contract endpoints for Islamic surety and credit enhancement.

Overview

The Kafalah rail provides:

Guarantee contract creation and management
Personal guarantee (Kafalah bil Nafs) and financial guarantee (Kafalah bil Mal) support
Guarantee fee calculation and collection
Claim processing and subrogation workflows

Kafalah is a guarantee contract where a third party (the guarantor, or Kafil) undertakes to fulfill the obligation of the debtor (Makful Anhu) if the debtor fails to do so. It is an essential instrument for credit enhancement, trade facilitation, and risk mitigation in Islamic finance.

The guarantee may cover the payment of a debt (Kafalah bil Mal), the physical presence of a person (Kafalah bil Nafs), or the delivery of an asset (Kafalah bil Taslim). In modern Islamic banking, Kafalah is primarily used for letters of guarantee, letters of credit, and performance bonds.

Charging a fee for Kafalah is a subject of scholarly debate. The majority of contemporary scholars permit a fee to cover the actual costs and risks borne by the guarantor, provided it does not become a means of profiting from lending. AAOIFI Shariah Standard No. 5 provides detailed guidance on permissible fee structures.

Endpoints

Create Kafalah Contract

POST /v1/rails/kafalah/contracts

const contract = await iof.kafalah.create({
  kafalah_type: "financial",
  description: "Performance bond - Construction Project Alpha",
  guaranteed_amount: 250000,
  currency: "USD",
  principal_debtor_id: "cpty_contractor",
  beneficiary_id: "cpty_project_owner",
  guarantor_id: "cpty_institution",
  guarantee_fee: 2500,
  validity_period: {
    start_date: "2025-01-01",
    end_date: "2026-06-30",
  },
});

Response:

{
  "id": "kfl_xyz",
  "type": "kafalah",
  "subtype": "financial",
  "status": "DRAFT",
  "guaranteed_amount": 250000,
  "currency": "USD",
  "guarantee_fee": 2500,
  "validity_period": {
    "start_date": "2025-01-01",
    "end_date": "2026-06-30"
  },
  "claim_status": "NO_CLAIM",
  "created_at": "2024-01-15T10:30:00Z"
}

Get Kafalah Contract

GET /v1/rails/kafalah/contracts/:id

List Kafalah Contracts

GET /v1/rails/kafalah/contracts

Execute Kafalah Contract

POST /v1/rails/kafalah/contracts/:id/execute

Process Claim

POST /v1/rails/kafalah/contracts/:id/claim

Contract Types

Type	Description
`financial`	Guarantee of debt payment (Kafalah bil Mal)
`performance`	Guarantee of obligation fulfillment
`personal`	Guarantee of a person’s presence (Kafalah bil Nafs)

Contract Status

Status	Description
`DRAFT`	Contract created, pending review
`PENDING_SHARIAH_REVIEW`	Awaiting Shariah board approval
`SHARIAH_APPROVED`	Approved by Shariah board
`ACTIVE`	Guarantee in effect
`CLAIMED`	Beneficiary has made a claim
`PAID`	Claim paid by guarantor
`EXPIRED`	Guarantee period ended without claim
`TERMINATED`	Contract terminated early

Shariah Compliance

The guaranteed obligation must be valid and enforceable under Shariah
The guarantee fee must not be excessive or constitute hidden interest
The guarantor has the right of recourse (subrogation) against the debtor after paying a claim
The guarantee must specify the guaranteed amount or be determinable
A conditional guarantee is permissible if the condition is clearly defined
The guarantor’s liability ceases when the underlying obligation is discharged

Webhooks

Event	Description
`kafalah.contract.created`	Contract created
`kafalah.contract.executed`	Guarantee activated
`kafalah.claim.submitted`	Claim submitted by beneficiary
`kafalah.claim.paid`	Claim paid by guarantor
`kafalah.contract.expired`	Guarantee period ended

Standards

Next Steps

Rahnu Rail - Pledge/collateral contracts
Hawalah Rail - Debt transfer
Contracts Rail - General contract management