The use of Bai Bithaman Ajil in Malaysia contradicts the teachings of Islam.
It is sinful for the government, Bank Negara Malaysia and Shari'ah advisory committees not to replace BBA for home financing with better products, stated an academic paper.
The paper, written by Nuarrual Hilal Mohamed Dahlan and Sharifah Zubaidah Syed Abdul Kader Aljunid, looks at the use of the contentious BBA with reference to abandoned housing projects. Calling for a revamp of BBA, their main dispute is that its use in housing loans involves elements of Gharar al-Fahish, or excessive profit with deception, and specifically asks how an Islamic bank as the property owner, could at the same time be a chargee to their own asset, rendering the positions and status of the property, the charge, ownership, purchaser, the bank and the property developer ambiguous.
Dahlan told The Islamic Globe that the property purchase and sale agreements preceding the BBA transaction may also be void under Islamic law hence annulling the subsequent BBA or any other Islamic home financing contracts.
As to the rulings of these contracts he said: "The current immunity of the Shari'ah Advisory Council of BNM is not warranted. They may [be] abusing their position and privilege." He has sent his concerns to the BNM governor and the country's PM. A member of the SAC contacted by The Islamic Globe declined to comment while a BNM spokesperson told us that academics have a right to express their opinion.
Lawyer and member of the Malaysian Bar's Islamic Finance Committee al-Sabri Ahmad Kabri said there is no uncertainty when using BBA for completed properties but the paper "has made a realistic analysis of BBA as practiced in Malaysia". To Dahlan's claim of the SAC's 'immunity' Kabri said: "The expert opinion of the SAC is binding on the courts. As a practitioner I must say any attempts in Malaysian courts to attack an IF product on the grounds of Shari'ah validity is bound to fail."
Razli Ramli of the Islamic Banking and Finance Institute Malaysia sees it differently: "SAC has never had 'immunity'. What SAC does is to list their resolutions to ensure standardization of banking activities in Malaysia. Individual Shari'ah advisors can either accept or refuse the resolutions." He added that many Malaysian IFIs have moved away from BBA.
However, as The Islamic Globe reported in Issue 2, the contract remains valid according to a ruling by the country's Court of Appeal. Ramli pointed out alternative home financing contracts such as Istisna'a', approved by the SAC for properties under construction. BNM, he said, is also working on a hire purchase act for Ijarah thumma al-Bai to add to Istisna'a' and Musharakah Mutanaqisah, giving IFIs a range of home financing options.
"Condemning people who are trying hard to benefit the Ummah is something, I feel personally, [is] not right. I would like to recommend the writer update his status on Islamic banking developments in Malaysia," concluded Ramli.
© The Islamic Globe 2011
