Global Islamic Finance: Resolution: Application of Hibah in the Contract of Al-Ijarah Thumma Al-Bai` (Central Bank of Malaysia)

Thursday, 2 February 2017

Resolution: Application of Hibah in the Contract of Al-Ijarah Thumma Al-Bai` (Central Bank of Malaysia)

An Islamic financial institution would like to offer hibah in al-ijarah thumma al-bai` (AITAB) as an incentive and encouragement to customers to timely observe their monthly payment of rent according to the prescribed schedule. In the proposed arrangement, hibah will be given to customers who pay their monthly rents in the first year without any late payment. The proposed hibah rate is 1% of the financing amount which will be directly credited into the account of eligible customers on the 13th month. However, customers who settle all his debts and terminate their AITAB contract within the first 12 months are not eligible to receive such hibah.

In this regard, the SAC was referred to on the issue as to whether the application of the concept of hibah in AITAB as proposed is permissible.

Resolution

The SAC, in its 13th meeting dated 10 April 2000, has resolved that giving hibah in an AITAB contract as an incentive to the customer who pays on schedule as proposed is permissible.

Basis of the Ruling

Giving hibah and gift is highly recommended as suggested in the following verse of al-Quran and hadith of Rasulullah SAW:

“...but if they choose of their own accord to make over to you a part of it, then you may enjoy it with pleasure and good cheer.”120

“Abu Abdullah al-Hafiz has reported to us, he said, I heard that Abu Zakaria Yahya bin Muhammad al-`Anbari said, I heard that Abu Abdullah al-Busyanji said, about the saying of the Prophet Muhammad SAW: Exchange gifts (among you) and you will love each other.”121

Besides that, there is no impediment in Shariah to apply the concept of hibah in AITAB contract sincehibah is a benevolent act and is at the discretion of the giver of hibah.

Issuer:

Central Bank of Malaysia (Bank Negara Malaysia)