Wakālah Structuring Framework
A contract in which a principal (Muwakkil) appoints an agent (Wakīl) to perform a defined act on the principal's behalf, with or without a fee. Widely used in investment management, takāful operations, treasury and corporate finance mandates.
Shariah Basis
"Send one of you with this silver coin of yours to the city — example of agency."
"Agency and the Act of an Uncommissioned Agent (Fuḍūlī)."
"Takāful — wakālah model governance."
AAOIFI Shariah Standard No. 23 — Agency
Parties
Owner of the act/asset; appoints and instructs the agent.
Acts within the scope and authority granted, in the principal's interest.
Essential vs Prohibited
Essential Conditions
- Subject matter must be clearly defined and Shariah-permissible
- Agency scope, authority limits and duration are documented
- Agency fee may be fixed, performance-linked, or combination — but must be unambiguous
- Agent owes the principal a fiduciary duty (amānah)
- Profit (if any) belongs to the principal; agent earns only the agreed fee
- Agent is liable for misconduct, negligence and breach of mandate
Prohibited Elements
- Guaranteed return to the principal from the agent
- Open-ended authority without defined scope
- Self-dealing by the agent without explicit principal consent
- Combination of agency fee with profit-sharing in a way that obscures fiduciary roles
Transaction Flow
- 1
Mandate Definition
Define scope, authority, performance benchmarks and exclusions.
- 2
Fee Structure
Agree fixed fee, performance fee or hybrid; document calculation.
- 3
Execution
Agent executes within mandate; maintains evidence of compliance.
- 4
Reporting
Periodic reporting to principal with audit trail.
- 5
Settlement
Profit returned to principal; fee paid to agent per contract.
- 6
Termination
Either party may terminate per agreed notice; outstanding obligations settled.
Required Documentation
- Wakālah Agreement
- Investment / Operating Guidelines
- Fee Schedule & Calculation Methodology
- Reporting Template & Frequency
- Conflict-of-Interest Policy
- Shariah Adviser Approval Memorandum
Risk Controls
- Authority limits encoded in operating procedures
- Independent monitoring of mandate compliance
- Conflict-of-interest register maintained
- Performance fee subject to high-water-mark or hurdle (where applicable)
- Annual Shariah audit
OSAS-WAK™ — Advisory Dossier
Open the corresponding OSAS™ advisory standard to access the approval memorandum template, transaction layout sheet and Shariah opinion structure for this contract.
Open OSAS-WAK™Part of the Onike Framework Ecosystem
OFIS™ · Onike Framework for Islamic Finance
Reviewed and Approved by Abdul-Azeez Onike Morufu — Registered Shariah Adviser, Securities Commission Malaysia
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