Islamic Finance – Choosing the correct Islamic Contract in Hire Purchase
leasing or ijarah Insofar as it permits the transfer of the right to use an item without transferring ownership to the user or the lessee, the Islamic contract of Ijarah effectively satisfies the requirements of leasing. To fulfill the objectives and characteristics of a traditional hire buy, however, and to permit the transfer of ownership when the lease term is up, a different contract is required. In order to enable the efficient transfer of the title of the leased asset to the customer/user of the usufruct, further search must be conducted to identify a contract or contracts to complement the Ijarah contract. Ijarah muntahia bi tamleek, also known as title transfer Sales, gifts, and waivers are just a few of the contracts that can legally and effectively transfer ownership from one party to another under Islamic commercial law. Therefore, a lender under Islamic hire purchase may arrange for the sale of the leased vehicle or arrange for its gifting to the customer/user at the conclusion of the lease period. According to Shari'ah Standard No. 9, Ijarah and Ijarah muntahia bi tamleek can successfully transfer the title of the car, according to the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI). The manner of transferring the title of the leased asset to the lessee under Ijarah muntahia bi tamleek shall be proven in a document, using one of the following methods: 1. by promising to sell the leased property for a token or other consideration, by paying the remaining rent in advance, or by paying the market value of the leased property. 2. an assurance to present it as a gift (for no consideration) 3. a promise to grant it, subject to the settlement of the outstanding payments. These clauses make it clear that the sale can take place by paying a token or nominal amount, counting the remaining Ijarah rents toward the purchase price, or by paying an amount that is equal to the market worth of the car the client intends to purchase. As an alternative, the financier/owner may include a gift contract to effect the transfer. This gift agreement may or may not be subject to conditions.
0 Comments
Leave a Reply. |
AuthorAnything you need to know about finance, money and business Archives
May 2023
Categories
All
|