Civil Law And Shariah Law
This is the issue about hire purchase under Civil Law and Shariah Law. As we know, hire purchase can be practiced in either the conventional way or the Islamic way. Basically, conventional hire purchase and Islamic hire purchase (AITAB) are quite similar where both are governed by the same laws, the Hire Purchase Act 1967. The subject matter of both the transactions is similar where includes all consumers goods and motor vehicles that specified in the First schedule of the Hire Purchase Act. (N.Irwani, 2007) Besides that, AITAB and conventional hire purchase is applied to the same customer groups which are individual, sole proprietor, partnership and corporate company. Other similarities of both the hire purchase are included term charges, period of financing and early settlement.
There are also having some differences between the AITAB and conventional hire purchase. Although AITAB do not have exact regulatory law, they have to follows the Shariah principles as well as the spirit of the Hire Purchase Act and the Contract act 1950 while conventional hire purchase follows only the Hire Purchase Act (Mohd.Ma'sum Billah, n.d.). Besides, conventional hire purchase and AITAB use different term where “loan” in conventional hire purchase is regarded as “financing” in AITAB, “interest rate” in conventional hire purchase is regarded as “profit rate” in AITAB, “hiring charges” in conventional hire purchase regarded as “mark-up” in AITAB, and “late payment interest” in conventional hire purchase is regarded as “late payment charges” in AITAB (Mohd.Ma'sum Billah, n.d.). Apart from that, AITAB agreement is based on the Hire Purchase Act 1967 with an additional agreement. Its have two agreement which are Al-Ijarah contract (hiring agreement) and Al-Bai contract (purchase agreement). This two agreement have two different stages where first stage is executing the contract of the true leasing(Al-Ijarah' Ain) with a promise to sell and the second stage is, once lease period expires and the lessee completed all payments, the lessor will fulfill his promise by executing the contract sale(Al-Bai' ) (Rhesa Yogaswara, 2009). However, the conventional hire purchase use only one agreement based on Hire Purchase Act 1967, which incorporates details of the transaction, conditions and warranties, parties rights and obligations, offenses and penalty (N.Irwani,2007). Moreover, under AITAB, customer has to sign Aqad letter (Acceptance letter) to denote the offer and acceptance of transactions whereas conventional hire purchase does not have this kind of agreement (Mohd.Ma'sum Billah, n.d.). Financing for AITAB is sourced from permissible(Halal) funds only which means the funds should not come from Shariah illegal activities such as operating bar or club selling liquor, gambling, prostitution and so on while the conventional hire purchase has no limitation of its sources funds ( Mohd.Ma'sum Billah, n.d.). Furthermore, the AITAB late payment charge is a little lower compare to conventional hire purchase where the conventional hire purchase charged a fee 8% per annum of the installment whereas the penalty for late charges for AITAB is only 1% (Mohd.Ma'sum Billah, n.d.). Some of the banks do not impose this penalty because the amount is very low but as a way to attract more potentials customers. Additionally, an AITAB requires its users to use Islamic takaful as an insurance coverage, whereas the conventional user will necessarily subscribe to a comprehensive conventional insurance policy (N.Irwani, 2007). According to the Syariah Law, in any Islamic transaction its origin and purpose must be legal. Therefore, those who engage themselves in activities that against Shariah law like gambling, prostitution and drug cannot take out an AITAB but in Malaysia, the customer will be offered conventional hire purchase because they have no limitation. On the subject of the responsibility, during the course of the Islamic hire purchase transaction, the owner will bear the basic and structural maintenance of the goods but the hirer is responsible for operational and routine maintenance since he constantly use the goods (N.Irwani, 2007). However, conventional hire purchase, the hirer will responsible for all the costs and maintenance. In addition, AITAB facility is applicable to all types of conventional hire purchase no matter its movable or immovable including real property. In contrast, conventional hire purchase is only limited to consumer goods, motor vehicles and non-Act good. Therefore, immovable property like houses or lands cannot use the conventional hire purchase facility (N.Irwani, 2007).
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