What does Hibah mean?

Hibah is a gift in Shariah. It refers to something (an asset) that is given voluntarily by a donor (hibah giver) to a recipient without expecting anything in return.

In Islamic banking, hibah is a discretionary gift that financial institutions may give to their customers, such as extra cash or perks or goods, as a gesture of goodwill

Is Hibah the same as interest or profit?

No, they’re different!

• Interest refers to the rate used in pricing conventional financing products or the rate of return on conventional deposit products.
• Profit rate - refers to a rate used in pricing Islamic financing products or a rate of return in Islamic deposit products.
• Hibah, on the other hand, is a voluntary gift given entirely at the discretion of the giver

Who can give Hibah?

Anyone who owns something of value can give a hibah, whether an individual, a financial institution, or an organisation. The key is that the giver must legally own the gift (like money or an asset) and give it freely, without being forced.

What kinds of things can be given as Hibah?

Hibah can be anything valuable, deliverable, or identifiable that can be owned and recognised by Shariah, like:

● Monetary items (most often in banking);

● Non-monetary items – e.g. vouchers, services, privileges, and other forms of benefit.

The giver decides what to provide, and it’s all free for the receiver.

How is the Shariah contract of Hibah positioned with the Qard structure of the KAF DB Savings Account-i?

The deposit account is structured in accordance with the underlying Shariah contract of qard (loan). Under this structure, hibah is regarded as a voluntary and non - contractual gift from KAF Digital Bank (the Bank) to the customer. When you place money in a KAF DB Savings Account-i, the following takes place:

● Customer (depositor) lends money (deposit sum) to KAF Digital Bank;

● KAF Digital Bank, as the borrower, guarantees to return your principal amount in full and make the sum available to you upon demand; and

● KAF Digital Bank may, at its absolute discretion, grant hibah to you as a token of appreciation. Such hibah is voluntary, does not form as part of accounts’ feature and cannot be demanded as a right.

How does KAF Digital Bank decide whether Hibah is given, how it is calculated, and the frequency for its Qard-based account?

Granting of hibah is entirely at the Bank’s discretion. Depositors may or may not receive hibah.

For KAF DB Savings Account-i, KAF DB has the full discretion over:

● The form of hibah to be granted (monetary and non-monetary);

● The recipient(s) of the hibah;

● The method of calculation (for monetary hibah); and

● The frequency of granting hibah (e.g., one-off, occasionally, recurring)

Why do financial institutions offer Hibah to customers of Qard-based accounts?

Financial institutions like KAF Digital Bank grant discretionary hibah as a gesture of appreciation to customers, recognising their trust and relationship with the Bank.

Can a financial institution guarantee or advertise Hibah rates for Qard-based accounts?

No. A financial institution is not allowed to guarantee, provide indicative, or prospective of granting hibah for qard-based deposits.

They may, however, share historical hibah information and clear disclaimers that there is no guarantee of future gifts. KAF Digital Bank’s historical hibah information is available here: https://www.kafdigitalbank.com.my/produk.

What happens if a financial institution promises Hibah for a Qard-based account but doesn’t give it?

Under a qard contract, any promise to give hibah is not permitted, as it would be tantamount to riba nasi’ah, which refers to money begets money.

Other contracts than qard may have an arrangement of promise to give hibah (such as ijarah contract, where at the end of the contract, the customer may receive hibah after completing the ijarah contract).

What happens to Hibah if an individual passes away?

● If hibah was already in the possession of the customer, it forms part of the customer’s estate.

● If hibah was not yet given, there is no entitlement — the customer’s estate has no claim over future hibah, since it is purely discretionary.