An Islamic bank has launched a product based on a financial lease, Ijarah Muntahiya Bittamlik. The purpose of the product is to finance the procurement of residential and commercial buildings by its customers

Fatawa Question

An Islamic bank has launched a product based on a financial lease, Ijarah Muntahiya Bittamlik. The purpose of the product is to finance the procurement of residential and commercial buildings by its customers. The modus operandi of the product is as follows ; Pursuant to submission of the financing request and promise to lease by the customer, the Islamic bank enters into a purchase agreement with the owner of the property ; The Islamic bank signs a lease agreement with the customer, whereby the customer pays fixed and variable rentals to the bank and in turn it procures the usufruct of the property for the leased period. The Islamic bank upon successful completion of the lease term and payment of all due rentals, sells the property to the customer at a price stated in the promise to sell. Such promise is issued by the bank in favor of the customer at the time of signing the lease agreement with the customer. In one case, the property was exposed to heavy fire, and as a result was seriously damaged, substantially compromising its utility. Shariah guidance is sought in the following issues : Who will bear the cost of repair and maintenance: the bank or the customer ? How to address the issue of rentals during the time when the usufruct is not enjoyed by the customer being a lessee ?

Fatwa

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Publisher

Islamic Finance News

Publication Date

2014-12-10

Country of Publication

Malaysia

Main Subjects

Economics & Business Administration
Islamic Studies

Data Type

Fatawa

Language

English

Record ID

BIM-783161

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• AMA