Issues and Prospects of Islamic Hire Purchase Financing: Malaysian Evidence

Azma, Nurul; Rahman, Mahfuzur; Albaity, Mohamed

doi:10.5296/jmr.v6i1.4536

Cited by 5 publications

(3 citation statements)

References 15 publications

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“…Other criticisms of cost distribution in partnership-based IB financing are that the financier in an MMP may impose on the customer taxes and other expenses that should ideally be shared between them (Meera and Razak, 2005). However, the difference between the MMP and mu Á d arabah-based investment accounts is that the asset being financed in the MMP is coowned by the IB and the customer, and hence causes greater problems in apportioning responsibility for expenses Razak, 2005, 2009;Azma et al, 2014;Zabri and Mohammed, 2018).…”

Section: Costs and Reward-riskmentioning

confidence: 99%

An analysis of the normative parameters of reward and risk in Islamic finance

Benaicha

2020

IJIF

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Purpose This study aims to define the parameters of the reward-risk principle in Islamic finance as established in the literature and discuss propositions that are presented on how such a principle is to be applied to Islamic banking products. Design/methodology/approach A descriptive approach is used to explore the normative parameters and criticisms of the application of reward-risk in Islamic finance. Findings The study finds that the principle of reward-risk is embodied in the multi-component concept of ‘iwadh (counter value) which must be evident in market transactions that involve commercial exchanges. The components include risk, costs, effort, value-adding and capital, all of which apply uniquely to different contractual forms of financing. Research limitations/implications The study uses academic literature and industry documents with modest contact with prominent practitioners and their general feedback on prevalent Islamic finance industry practices. Practical implications This study exposits the variety of approaches in applying the reward-risk principle and sheds light on the primary elements of the principle which will facilitate its greater consideration by the Islamic finance industry. Originality/value This study is a meaningful attempt at conveniently summing up and applying the parameters that are considered when discussing the scope of the reward-risk principle in Islamic finance.

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Section: Costs and Reward-riskmentioning

confidence: 99%

An analysis of the normative parameters of reward and risk in Islamic finance

Benaicha

2020

IJIF

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“…Yet there are critics who raise questions about issues of compliance and other operational features of Ijarah financing. It is evident that Ijarah financing operations do not comply with the Shari'ah precepts of ownership, maintenance responsibility, deposit payment and interest-based calculation of profits (Azma et al, 2014). Abdullah and Dusuki (2006) studied customers' perceptions of Islamic hire purchase facilities in Malaysian banks.…”

Section: Perceptions and Islamic Finance Institutionsmentioning

confidence: 99%

Measures of customers’ perception of car Ijarah financing

Wahla

Hasan

Bhatti

2018

JIABR

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Purpose The main aim of this paper is to measure customers’ perception of car Ijarah financing transactions services provided by the Islamic banks and financial institutions in Pakistan. Design/methodology/approach The paper uses two research methodologies: Kruskal–Wallis and Mann–Whitney test (non-parametric) and logit regression model (parametric). Both methods are then applied to a real data set of 300 respondents from various cities of Pakistan in the car Ijarah financing industry. The demographic effects are also investigated to see the perception about the degree of Shari’ah compliance and the quality of service of transaction offered by banks. Findings Main finds of the paper reveal that the customers who used the car Ijarah facility from Islamic banks have positive attitude toward this sort of transaction. In addition, gender, income, marital status affect the perception about the quality of Shari’ah compliance, and the quality of service of transaction issues are very important to selected clients in the industry. Research limitations/implications These findings are limited to the car Ijarah financing industry and may not be applicable in other banking products in Pakistan and elsewhere. Practical implications Based on the results of this study, potential Islamic bank customers may find it helpful choose products or make product decisions conveniently. The findings of the paper also support Islamic banks in improving the Ijarah facility to increase their customer base in the geo-political locality with similar characteristics as Pakistan. Social implications Shari’ah compliance in the Islamic finance industry is a sensitive issue in Pakistan, and hence, car Ijarah’s Shari’ah compliance can affect banks’ reputation and sensitivity. Originality/value The work reported in this paper is original, unpublished and the paper is not submitted elsewhere for publication.

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“…33 Besides the above-mentioned issues, there are several other drawbacks with regard to the practice of AITAB which range from customers' attitude, lack of experienced bank officers to handle such transactions, poor awareness and cooperation among dealers, complicated documentations, and competition with the conventional higher purchase instrument in the market. 34 The jurisprudential or legal issues on the other hand encompass issues of ownership, maintenance, liability, penalty, and legal treatment. 35 Regarding the issue of ownership, banks as owner of assets in AITAB instruments are supposed to take on risks, liabilities and responsibilities on those assets.…”

Section: The Aitab Enigmamentioning

confidence: 99%

Maqasid in Risk Management: An Analysis of Ijarah Contract with Special Reference to Malaysia

Abdullah

Al-Mubarak

2015

ICR Journal

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Ijarah-based financing is currently generating greater interest among industry players and policy makers due to its minimal risk exposure. Being asset-backed it has a lesser risk overload, no default risk and better profits and now offers a viable alternative to controversial debt-based financing instruments. This paper attempts to highlight the benefits of applying the objectives (maqasid) of ijarah contract and how a diligent compliance to its maqasid can help manage Shari’ah and business risks. It is also hypothesised in this study that a sincere compliance to the Shari’ah’s objectives in financial transaction (maqasid al-mucamalat) would reduce risks in the Islamic banking industry. Current applications of ijarah-based instruments by Islamic banks in Malaysia are analysed to show the gaps between its theoretical presumptions and the actual applications on the ground. Some unresolved Shari’ah issues relating to the implementation of al-ijarah thumma al- bayc (AITAB) (a contract of leasing ending with a sale) as well as issues regarding sukuk al-ijarah (leasing bond) are discussed in order to provide evidence for such dissonances. The study recommends constructive measures to be undertaken by policy makers to resolve the governance and legal problems with regard to the implementation of AITAB and sukuk al-ijarah.

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Issues and Prospects of Islamic Hire Purchase Financing: Malaysian Evidence

Cited by 5 publications

References 15 publications

An analysis of the normative parameters of reward and risk in Islamic finance

An analysis of the normative parameters of reward and risk in Islamic finance

Measures of customers’ perception of car Ijarah financing

Maqasid in Risk Management: An Analysis of Ijarah Contract with Special Reference to Malaysia

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