Journal of Contemporary Islamic Law

No e-ISSN: 0127-788X

Islamic Personal Financing Instruments in the Malaysian Banking Industries: Issues and Alternatives

Amir Fazlim Yusoff,
Department of Sharia Law, Faculty of Islamic Studies, Universiti Kebangsaan Malaysia. 
Mat Noor Mat Zain,
Department of Sharia Law, Faculty of Islamic Studies, Universiti Kebangsaan Malaysia. 
Salmy Edawati Yaacob,
Department of Sharia Law, Faculty of Islamic Studies, Universiti Kebangsaan Malaysia. 
Hanira Hanafi,
Faculty of Economic and Administration, University of Malaya
Nik Abdul Rahim Nik Abdul Ghani,
Department of Sharia Law, Faculty of Islamic Studies, Universiti Kebangsaan Malaysia. 
Abdul Mu’min Mohammad Idrus,
Muhammad Shahir Ridzuan Md Radzi,
Postgraduate Student, Department of Sharia Law, Faculty of Islamic Studies, Universiti Kebangsaan Malaysia.
Received: 21 March 2016 | Accepted: 10 May 2016 | Published: 01 June 2016 

2016, Vol. 1(1), pp. 24-38. | PDF

The application of Islamic personal financing instruments in the Malaysian banking industries such as bayc al-cīnah (same-item sale-repurchase) and organised tawarruq (commodity cost-plus sale) has suffered a worldwide ban by prominent fatwa bodies in Islamic world. The situation has led to negative consequences such as bad perceptions to the Malaysian banking industries. The aim of this article is to provide an overview related to the Islamic personal financing instruments. Analysis focuses on issues related to the unlawfulness of the instruments. This qualitative research employs content analysis approach. It reveals that Islamic personal financing instruments such as bayc al-cīnah and organised tawarruq that have been practised in Malaysia contain unlawful elements that violate Islamic law and its objectives. Islamic banking and finance needs alternative instruments to replace the current unlawful financing tools to maintain Sharia compliant status.

Keywords: Islamic personal financing, bayc al-cīnah, tawarruq, rahn-based qarḍ, commodity murābaḥah


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