Can an Islamic bank also adopt this practice and deduct advance installments from its customers out of their leave salary amounts, which will substantially curtail the past-due amounts for the Islamic bank ?

Fatawa Question

Employers pay their staff advance salaries through their respective bank accounts for the leave period when they go on vacation. The employees generally withdraw the full amount without leaving enough balance to cover the installments for the finance they have taken from the Islamic banks that will be due during their leave period. The conventional banks recover the amounts of installments upon receiving leave salaries despite the fact that the installments are not due. It allows them to avoid piling up retail past dues in their books. Can an Islamic bank also adopt this practice and deduct advance installments from its customers out of their leave salary amounts, which will substantially curtail the past-due amounts for the Islamic bank? If yes, what will be the impact of such advance recovery of installments to Murabahah (e.g. car financing) and Ijarah (e.g. home financing), which constitute a major part of an Islamic bank’s retail book.

Fatwa

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Publisher

Islamic Finance News

Publication Date

2013-03-20

Country of Publication

Malaysia

Main Subjects

Economics & Business Administration
Islamic Studies

Data Type

Fatawa

Language

English

Record ID

BIM-784627

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• MLA
• AMA