Shariah Compliant Asset Financing
Question:
Is it permissable to buy a car in instalment scheme if the manufacturer and financier are the same company even if they are added intrest in the invoice value. How can we purchase a car in instalment scheme without involving haram aspects.
Answer:
In the Name of Allah, the Most Gracious, the Most Merciful.
As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.
There are two dimensions to your question:
1. Buying a car on installments and the manufacturer and financier are one and the same
2. Shariah Compliant Vehicle Installment Scheme
1. Your question is unclear and vague. Kindly advise on the specifics of the transaction in order for us to issue a specific ruling. Nevertheless, you state that “Both the manufacturer and financier are the same company”, if you are referring to a “Buy Back Sale and Purchase Agreement” , then this is not Shariah Compliant since the Shariah has explicitly prohibited the execution of two transactions within one transaction. A buy back sale and purchase agreement involves two transactions in one, viz. the company initially sells the car to the client and then the client purchases the same car from the company for fixed installments over a fixed maturity under one agreement.
2. There are various Shariah Compliant Vehicle financing options. Hereunder are a few options:
1. Master Ijarah Facility Agreement (MIFA)
Ijarah is an Arabic term referring to “leasing/hiring”. Under the Master Ijarah Facility Agreement, the investor purchases the asset (vehicle) and then leases out the asset to the client for a fixed maturity/tenure in exchange of fixed monthly installments. The investor may choose to gift the asset upon maturity or retain the asset. It is important that both the contracts are independent and separated from each other.
2. Master Murabahaha Facility Agreement (MMFA)
The investor purchases the asset and then sells the same asset to the client in exchange of fixed installments for a fixed maturity.
It is important to note that there are various stages involved in Shariah Compliant asset financing and each stage must be well defined, independent and separated from each other. You are most welcome to submit your specific asset financing requirements for our analysis.
and Allah Ta'ala Knows Best
Mawlana Ismail Desai
Student, Darul Ifta
Durban, South Africa
Checked & Approved:
Mufti Ebrahim Desai
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