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Posts Tagged ‘BBA

Malaysian court rules divisive Islamic contract valid

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Points of Essence:

  • The Malaysian court of appeal has finally delivered a verdict which is in favor of Bai Bithaman Ajil. The controversy surrounding this Islamic home product in the global Islamic banking arena is well known which is further exacerbated by lower court rulings holding the product  contractual document invalid. However, the latest ruling by the second highest court in the court upholding the validity of the product’s contract will be at least for now set a clear direction for Islamic finance in the country.  Reuters has the report.

KUALA LUMPUR, April 1 (Reuters) – A Malaysian court has ruled that a popular but controversial Islamic finance contract is valid, a move expected to boost sharia banks in Southeast Asia’s most developed Islamic financial market.

The bai bithaman ajil or deferred payment sale contract is the mainstay of Malaysia’s 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.

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Written by Suapi Shaffaii

April 5, 2009 at 1:38 am

Malaysia’s RHB Islamic drops controversial contract

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Points of Essence:

  • Malaysian RHB Islamic Bank has decided to do away with the controversial contracts  of Bai Inah and Bai Bithaman Ajil which are prominently used by Malaysian financial institutions including RHB Islamic. This will bring the institution closer to the globally accepted Shariah compliant legal documents.

KUALA LUMPUR, Dec 9 (Reuters) – Malaysian sharia lender RHB Islamic Bank Bhd will no longer use a contract rejected as un-Islamic by Middle Eastern scholars, in a bid to adopt globally accepted sharia standards, a newspaper said on Tuesday.

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Written by Suapi Shaffaii

December 9, 2008 at 9:36 pm

BNM to review SAC’s role

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Points of Essence:

  • The recent court cases on Islamic finance in Malaysia have put the Malaysian Islamic banking services industry under a spotlight. This does not augur well to the country as it is positioning itself to emerge a primary global hub for Islamic finance. The central bank is reportedly taking necessary measures to contain the possible far reaching effects of the court judgements to the industry as a whole. This includes to necessitate mandatory reference to the Shariah Advisory Council upon  judicial authorities when presiding over Islamic finance cases.


By Halim Wahab & Habhajan Singh
PLANS are underway to compel the High Court to refer to the Shariah Advisory Council (SAC) of Bank Negara Malaysia (BNM) when presiding over Islamic banking and finance-related cases, unlike presently, where High Court judges are neither required to consult the Shariah experts or heed their advise.

It is learnt that the central bank is reviewing the necessary laws to make this possible. This follows the recent controversy over Islamic financing under the Al-Bai’ Bithaman Ajil (BBA) concept and the confusion over the role of the SAC in determining the compliance status of Islamic finance products.

To date, BNM has not responded to queries from this newspaper on the implications of the judgment to the Islamic banking industry or if plans for changes to the SAC’s role and powers are underway.

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Written by Suapi Shaffaii

October 30, 2008 at 11:31 pm

Posted in Islamic Finance Legal

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Industry players mixed on High Court judgment on BBA

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Points of Essence:

  • BBA as one of the Islamic finance products designed for home financing is the most contentious product being subject to strict scrutiny by the Malaysian judiciary resulting in varied judgments. Lately, not in favor of the Islamic financial institutions. The latest case ruled that the sale element in the BBA was not a bona fide sale but merely a financing facility, thus in conflict of the Islamic Banking Act 1984.
  • The industry had downplayed the impact of the latest case amid fear that the recent Malaysian court ruling may have impacted the Islamic financial industry in the country. Refusing to restructure the BBA product, the banks maintain their right to claim the money owed by their customers.This is risky considering the likelihood of more similar cases brought to court, with defaulters plead inconsistencies with the Shariah injunctions just to avoid payment to the financial institutions.

by Ellina Badri

KUALA LUMPUR: Industry players are mixed on the impact of a recent High Court ruling that the application of Al-Bai’ Bithaman Ajil (BBA) as an Islamic house financing facility is contrary to the Islamic Banking Act 1983.

Last month, High Court Judge Datuk Abdul Wahab Patail, in a collective judgment for 11 cases involving Bank Islam Malaysia Bhd and Arab-Malaysian Finance Bhd as plaintiffs, had ruled the sale element in the BBA was “not a bona fide sale”.

An industry player told The Edge Financial Daily that the judgment would have no impact on the Islamic banking industry, as it did not affect the banks’ ability to claim money owed by customers.

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Written by Suapi Shaffaii

September 16, 2008 at 8:21 pm