In relation to debts (duyun), hiwalah refers to the transfer/ assignment of debt from one party (the transferor/ assignor, or muheel) to another (the payer or muhal alaihi) to the benefit and order of the creditor (the muhal).

As far as rights are concerned, hiwalah involves the transfer/ assignment of the right to claim from one creditor to another. The new creditor replaces the original one, and therefore the debtor owes the new creditor, and is no more indebted to the original creditor.

In this sense, the assignment of debt differs from the assignment of right in that in the former a debtor is replaced by another debtor, whilst in the latter a creditor is replaced by another creditor.

Hiwalah is a binding contract (aqd lazim), i.e., it cannot be terminated unilaterally, but rather both parties have to agree termination in order for it to be effective. Shari’a requires that an assignment of debt come into force immediately. This means that it neither can be suspended for a period of time nor be contingent on a future occurring. Notwithstanding, it is permissible to defer payment of a assigned debt to a preset future date.

Hiwalah is typically classified as restricted hiwalah and unrestricted hiwalah.