This query is related to transfer of ownership to the bank before the bank finances a fleet of cars for its customer (a car dealer)‎ under a Murabahah contract

Fatawa Question

This query is related to transfer of ownership to the bank before the bank finances a fleet of cars for its customer (a car dealer) under a Murabahah contract. The question is whether the formal registration of cars purchased by the bank from the manufacturer is mandatory in the bank’s name before the bank sells the cars to the dealer on Murabahah basis ? As per market practice, the cars are registered only in the name of the end buyer when they purchase the cars from the dealer in cash or get them financed through conventional or Islamic banks. Since conventional banks do not need to purchase the cars in their name in order to finance their customers as they simply lend money to the customer to buy cars from dealers, the registration issue is not relevant for them. However, since Islamic banks cannot sell anything which they do not first own, guidance is needed for avoiding the requirement of the registration of cars in the name of the Islamic bank to confirm ownership, since this will result in extra cost and effort, making Islamic car financing a more expensive affair for the dealers ; who may pass on such extra costs to the end buyers.

Fatwa

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Publisher

Islamic Finance News

Publication Date

2013-04-24

Country of Publication

Malaysia

Main Subjects

Economics & Business Administration
Islamic Studies

Data Type

Fatawa

Language

English

Record ID

BIM-784623

• APA
• MLA
• AMA