Repo Agreement: A Comparative Jurisprudential Study.

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Al-Azhar University,Mansoura, Egypt.

Abstract

he repurchase agreement (repo) is one of the primary mechanisms that many banks utilize to overcome liquidity challenges. This study aims to thoroughly examine the legal implications of contemporary financial transactions, the advantages and disadvantages associated with such agreements, and to provide a jurisprudential analysis of this agreement within Islamic law. The study also seeks to determine the Sharīʿa ruling on repo agreements and to present alternative solutions in accordance with Islamic principles if the agreement is deemed impermissible. Furthermore, it sheds light on a contemporary financial issue that was previously unknown, explores the opinions of Islamic jurists on this matter, and demonstrates how modern scholars have addressed financial transactions by establishing principles that can serve as a basis for rulings on current transactions. The examination of this topic provides clarity on these principles and rulings.
This study adopts a comparative inductive methodology to reach the intended Sharīʿaruling on repo agreements. The study concludes that the common term for this agreement in financial markets is the "repo agreement," which is classified as a common practice in money markets. The repo agreement consists of five essential components: the contracting parties, the contractual form (offer and acceptance), the financial securities, the maturity period, and the return (repo rate). From a Sharīʿa perspective, the traditional repo agreement is classified as an interest-bearing loan, which is prohibited under Islamic law.

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