AL-IJARAH AL-MAWSUFAH FI AL-DHIMMAH: THEORY AND APPLICATIONS

Book

• Al-Ijarah al-Mawsufah fi al-Dhimmah: Theory and Applications
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• Abu Talib Mohammad Monawer (University of Malaya)
• Md. Habibur Rahman (Université Internationale d'Agadir - Universiapolis, Technopôle d'Agadir)
• Akhtarzaite Abd Aziz (International Islamic University Malaysia)
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• Abstract

Forward ijarah is a newly introduced financing tool used for different financial services by individuals and Islamic financial institutions (IFIs). IFIs currently provide a financing product for home under construction based on the musharakah mutanaqisah partnership (MMP) whereby forward ijarah is applied as a sub-contract. There is a consensus on legality of forward ijarah . The parameters of forward ijarah are constituted from rules of both ijarah and salam. Forward ijarah is allowed to be used along with other valid contracts in hybrid mode as long as it fulfills the criteria put forward by scholars. The book also shows that although usufruct is not a valuable asset in its originality according to Hanafi School, usufruct of ijarah is excluded from being a valueless asset on the basis of exception regardless of whether it is ijarah of a particular object or usufruct in liability. In addition, if the rental is fixed it comes out of being debt in liability, albeit it is not handed over. Therefore, immediate payment is not obligatory in forward ijarah . The issue that contradicts Shari'ah principle is that the bank does not bear any risk; rather, it considers the rental paid by customer for forward ijarah during the construction period as the compensation for the failure of istisna', and the customer also cannot charge the developer for abandoned house. The possible solution for the issue is that the bank should share the risk according to its portion in partnership as well as the customer can refer to the developer to charge the compensation for his actual failure in istisna'. Therefore, the provision(s) should be added in the law of Islamic banking and finance that binds the developer to compensate the customer for his actual default.

Keywords 

Forward Ijarah, Theory, Applications, Shari'ah Perspective, Ijarah Mawsufah fi Dhimmah, MMP, Home Financing, 

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Suggested Citation

Monawer, Abu Talib Mohammad, Md. Habibur Rahman, and Akhtarzaite Abdul Aziz. Al-Ijarah Al-Mawsufah Fi Al-Dhimmah: Theory and Applications. Kuala Lumpur: IBFIM, 2017.