Dhaman

A guarantee or warranty in Islamic law. In commercial transactions, dhaman refers to a guarantee provided by a third party to cover a financial obligation if the primary debtor defaults.

Unlike conventional guarantees that may involve a fee (which could constitute riba), an Islamic guarantee (kafalah) should ideally be provided without charge as a charitable act, though some scholars permit a fee to cover administrative costs.

Dhaman is guarantee or liability assumption — one party commits to cover another's obligation if they default. Classical fiqh treats guarantee (also called kafalah in this context) as a charitable accommodation, not a profit center: the majority position, codified in AAOIFI's standard on guarantees, is that a guarantor may recover actual expenses but may not charge a fee proportional to the guaranteed amount, because selling bare credit protection amounts to trading in pure risk.

That single rule explains several oddities of Islamic finance. It is why Islamic banks structure letters of credit and performance bonds as agency-plus-expense arrangements rather than priced guarantees, why conventional loan guarantee fees and credit default swaps fail Shariah screens, and why co-signing arrangements in halal financing are documented as gratuitous.

Dhaman also underpins product design: in a Musharakah home financing, the provider cannot make the customer guarantee the provider's share of market risk, or the 'partnership' becomes a disguised loan. For U.S. Muslims the concept surfaces practically when co-signing a relative's financing (permissible, and rewarded as helping another believer), and when evaluating products: any fee that exists purely to shift risk — rather than to pay for a real service or asset — deserves scrutiny under the dhaman rules.