Promissory Notes

Abstract

This entry explores the notion of promissory notes – senet – and its various variants within the framework of Islamic economics. A promissory note is a written instrument that is executed, signed, and occasionally authenticated by an authorized entity to record a financial transaction or occurrence. Promissory notes, which have a historical lineage tracing back to ancient civilizations, are sometimes referred to as valuable documents, including bills of exchange, checks, and bonds. Promissory notes are permissible within the framework of Islamic law, on the condition that they do not incorporate any violations of Sharia principles, such as riba (usury), gharar (uncertainty), or maysir (gambling). Promissory notes, which held significant significance in the commercial sphere throughout the early era of Islam, are prohibited from assuming the function of generating currency through a credit-based mechanism. In the Islamic finance industry, the selection of securities involves not only adherence to Sharia principles but also the consideration of other criteria. These criteria include the requirement for securities to be supported by tangible assets and to possess adequate assets to satisfy the issuer’s payment obligations. This section focuses on the promissory note’s objective of elucidating its historical evolution and fiqh aspects.