AGL 38.10 Decreased By ▼ -1.48 (-3.74%)
AIRLINK 128.12 Decreased By ▼ -3.10 (-2.36%)
BOP 6.88 Increased By ▲ 0.07 (1.03%)
CNERGY 4.53 Decreased By ▼ -0.18 (-3.82%)
DCL 8.07 Decreased By ▼ -0.37 (-4.38%)
DFML 39.30 Decreased By ▼ -2.17 (-5.23%)
DGKC 78.25 Decreased By ▼ -3.84 (-4.68%)
FCCL 31.45 Decreased By ▼ -1.65 (-4.98%)
FFBL 70.20 Decreased By ▼ -2.67 (-3.66%)
FFL 11.95 Decreased By ▼ -0.31 (-2.53%)
HUBC 107.50 Decreased By ▼ -3.24 (-2.93%)
HUMNL 13.55 Decreased By ▼ -0.96 (-6.62%)
KEL 4.85 Decreased By ▼ -0.34 (-6.55%)
KOSM 7.50 Decreased By ▼ -0.11 (-1.45%)
MLCF 37.25 Decreased By ▼ -1.65 (-4.24%)
NBP 67.30 Increased By ▲ 3.29 (5.14%)
OGDC 187.51 Decreased By ▼ -5.31 (-2.75%)
PAEL 24.95 Decreased By ▼ -0.73 (-2.84%)
PIBTL 7.25 Decreased By ▼ -0.09 (-1.23%)
PPL 147.20 Decreased By ▼ -6.87 (-4.46%)
PRL 24.79 Decreased By ▼ -1.04 (-4.03%)
PTC 16.73 Decreased By ▼ -1.08 (-6.06%)
SEARL 79.30 Decreased By ▼ -3.00 (-3.65%)
TELE 7.38 Decreased By ▼ -0.38 (-4.9%)
TOMCL 32.35 Decreased By ▼ -1.11 (-3.32%)
TPLP 8.18 Decreased By ▼ -0.31 (-3.65%)
TREET 16.61 Decreased By ▼ -0.01 (-0.06%)
TRG 56.25 Decreased By ▼ -1.15 (-2%)
UNITY 27.72 Increased By ▲ 0.21 (0.76%)
WTL 1.32 Decreased By ▼ -0.05 (-3.65%)
BR100 10,239 Decreased By -265.6 (-2.53%)
BR30 30,232 Decreased By -994 (-3.18%)
KSE100 96,251 Decreased By -1828.8 (-1.86%)
KSE30 30,009 Decreased By -549.4 (-1.8%)

A Malaysian court has ruled that a popular but controversial Islamic finance contract is valid, a move expected to boost sharia banks in Southeast Asias most developed Islamic financial market. The bai bithaman ajil or deferred payment sale contract is the mainstay of Malaysias Islamic finance industry and is commonly used in home loans.
But some religious scholars, especially in the Gulf, say it is an interest-based loan cloaked in Islamic dress. But in a judgement delivered on Tuesday, the Malaysian appeal court said that a bai bithaman ajil contract, as practised by most Malaysian banks, is valid. "The court of appeal also reiterated that a bai bithaman ajil contract is a sale transaction and therefore must not be compared to a loan transaction," Bank Islam, which was party to the case, said in a statement.
Most Malaysian banks structure bai bithaman ajil home loan contracts as a two-party transaction where a customer who has paid a deposit for a property transfers his rights to the asset to the bank. The bank then charges him a sum that includes the cost price plus a profit, payable in instalments. An earlier decision by a lower court had said such an arrangement resembles a conventional loan, arguing that the bank should first buy the property from the developer before selling it to the customer for a profit.
Megat Hizaini Hassan, an Islamic finance lawyer, said the appeal court decision was positive for Islamic banks. Bai bithaman ajil, bai inah (sell and buyback contract) and bai al dayn (debt trading contract) account for over 80 percent of the Islamic banking portfolio in Malaysia, according to Maybank Investment Bank.

Copyright Reuters, 2009

Comments

Comments are closed.