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This study aims to examine the scholars’ views on the legality of bilateral rebate in Islamic financial transactions. It also aims to evaluate the contemporary application of bilateral rebate in Islamic banking operation as an alternative to the conventional mechanism in handling the events of early settlement of debt, early termination of debt facility and early withdrawal of term deposit.

The study used deductive and inductive methods to analyze the juristic literature of all the major schools of law on the legality of both bilateral and unilateral rebate in a financial transaction.

The study found bilateral rebate (ibra’ mutabadal), instead of unilateral rebate, to be the best and fairest Islamic mechanism to overcome injustice in several events that may impact the bank’s liquidity such as that of early settlement of debt facility and early withdrawal of term deposit in the sense that the interest (maslahah) of both transacting parties is equally secured.

This study has its limitation, as it only covers the applicability of bilateral rebate in Islamic banking operation. It does not include the applicability of bilateral rebate in other segments of Islamic finance such as Islamic capital markets and Islamic insurance (Takaful business).

This paper has practical implication for Islamic banking industry particularly with regard to its liquidity management in the event of early settlement of a debt facility, early termination of an Islamic facility and early withdrawal of Islamic term deposit. It may also assume policy implication in the event that the regulator adopts the legality of bilateral rebate in its Islamic banking policy and guidelines.

This paper offers an Islamic alternative to the conventional mechanism in handling the event of early settlement of a debt facility, early termination of an Islamic facility and early withdrawal of Islamic term deposit. Under conventional banking, there are certain fees and charges imposed on customers in the above events like early settlement charge and early withdrawal charge. Unlike its conventional counterpart, Islamic banks cannot opt for the conventional method that seems unjust to the customers as the charge is imposed without Sharīʿah basis. In this case, bilateral rebate serves as a fair mechanism to manage the bank’s liquidity in the aforementioned events.

This paper aims to compare the rebate computation in Islamic sale-based financing contracts as proposed by Bank Negara Malaysia (BNM) in its guidelines on ibrāʾ (rebate) – with the rebate computation in conventional finance that is applicable to conventional loans, thus examining if there is a significant difference between the two approaches.

The paper employs the qualitative analysis method, involving review and discussion of relevant literature. Subsequently, a quantitative analysis is utilized to compare both rebate computations: the one proposed by BNM for Islamic sale-based financing contracts and the conventional finance computation that is utilized in conventional loans.

BNM's rebate computation for debts resulting from sale-based financing contracts does not differ from the conventional finance rebate computation applied to conventional loans; such similarity may raise the usury concerns that the conventional finance rebate computation raises.

The paper focuses only on the fixed profit rate rebate computation proposed by BNM guidelines.

The results highlight the need for seeking another rebate computation to be applied in Islamic financial institutions in the case of mandatory bilateral rebate for sale-based financing contracts – a computation that differs from the practice utilized in conventional loans in order to avoid any usury implications associated with conventional finance computation.

The paper examines the rebate practice proposed by BNM for sale-based financing contracts. Forcing a predetermined rebate computation in sale-based financing contracts could be plausible as BNM requires; however, the suggested computation might be questionable because it resembles conventional finance computation.

This paper aims to investigate the current regulation of ibrā’ (rebate) set by the Central Bank for the Islamic banks in Malaysia and how far its original concept has been compromised to make it adaptable to the modern financial system.

This study, with regard to practising ibrā’ in Islamic banking in Malaysia, is qualitative in nature, using semi-structured interviews carried out with two types of informant: members of either the National Sharīʿah Advisory Council (NSAC) or the Internal Sharīʿah Committee (SC). All data are analysed based on the content analysis method.

The findings reveal that while stipulating an ibrā’ clause makes practising ibrā’ stray from its original concept, it has successfully tackled the current problem. However, the long-term consequences should be a concern, particularly Islamic banking products, which have been significantly influenced by the conventional system, including interest rates and the debt structure, neither of which should be identified with Islamic banking.

This study is limited because it focusses on the practice of ibrā’ in Malaysian Islamic banking. Moreover, data are collected from nine interviewees from NSAC and SC from different Islamic banks. Thus, the results cannot be generalised to other countries.

This paper provides a fresh discussion of ibrā’ from the perspective of regulators and the experience of practitioners in Malaysia, particularly in respect of aspects of Sharīʿah and current actual practice.

This paper aims to propose an Islamic compliant approach that deals with the prepayment rebate on debts resulting from cost-plus sales and their accompanied sale-based financing contracts. The proposed approach uses the time value of money concept without charging excessive fees from the debtor in the early settlement of debts.

The paper uses a qualitative analysis via analyzing and reviewing relevant literature. A quantitative analysis is subsequently used with a proposed computation that addresses prepayment rebate accompanied by debts resulting from cost-plus sales.

The proposed approach results in a rebate amount for the debtor greater than those rebate amounts resulting from either conventional finance techniques or current Islamic finance practices.

The application of the descending rebate proposed computation in this paper is restricted to cost-plus sale and their accompanied sale-based financing contracts only. The computation does not address any agreement or deal that may involve a rebate without a selling transaction.

The paper criticizes the prevailing practices for computing rebates in the case of debt prepayment, whether those nominated by conventional finance or others currently employed by most Islamic financial institutions. The paper also introduces a new rebate computation aimed to comply with Islamic finance's real context.

This paper aims to investigate the extent to which maṣlaḥah (public interest) is taken into consideration in Islamic banking operations in Malaysia, particularly in bayʿ al-ʿīnah (sale and buyback), taʿwiḍ (compensation) and ibrāʾ (rebate).

This study applies deductive and inductive methods to analyze the application of maṣlaḥah in Islamic financial transactions. Three issues in Malaysia are selected as a case study, allowing bayʿ al-ʿīnah, standardizing the rate of taʿwiḍ and stipulating the ibrāʾ clause in financial agreements. As this study is qualitative in nature, all data are analyzed based on the content analysis method.

Both the maṣlaḥah of Islamic banks and their customers were found to be considered by the Central Bank of Malaysia in the implementation of contracts and principles of Islamic banking. The first maṣlaḥah represents the viability of Islamic banks, while the second maṣlaḥah promotes fairness and transparency between Islamic banks and their customers.

This study only focuses on the contracts and principles of Islamic banking operations in Malaysia with regard to three selected issues.

This paper clarifies the practical application of maṣlaḥah in the Islamic banking industry, particularly with regard to implementing its contracts and principles.

This paper analyzes the argument of maṣlaḥah on the issues of bayʿ al-ʿīnah , taʿwiḍ and ibrāʾ in Malaysia, which are considered among scholars to be debatable issues. While many discussions focus on the legal aspect of Sharīʿah on those issues, this study emphasizes how the application of maṣlaḥah aims to solve the current problems and harmonize between Sharīʿah and reality.

This chapter provides a case study on a Sharīʿah-compliant home facility contract based on the Bai Bithaman Ājil (BBA) contract, generally used by Islamic banks in Malaysia. The study emphasises on the need to comply with the existing legal framework and execute relevant contracts in line with the Sharīʿah resolutions of the Sharīʿah Advisory Council of Bank Negara Malaysia without causing harm (ḍarar) to the customers or introducing uncertain elements or procedures (gharar) in the execution of the agreements. This chapter is based on doctrinal analysis of the relevant issues as well as a qualitative legal research through content analysis of relevant BBA agreements, case law as well as statutory provisions. The case study used in this chapter is completely anonymised. The study finds that the execution of BBA agreements in Malaysia leaves much to be desired. Even though the regulatory framework for Sharīʿah-compliant home financing in Malaysia is robust, there are some legal and Sharīʿah considerations which the stakeholders need to look into in order to project Malaysia as the main global hub of Islamic finance. This study demonstrates the need for proper Sharīʿah auditing of the practical execution of BBA agreements to avoid an incorporated element of gharar at the time of execution of the agreements, which might ultimately lead to unforeseen reputation risks for the bank. Though there are several studies on the Sharīʿah, financing and accounting aspects of the BBA home facility agreement, this study focusses on both Sharīʿah and legal issues, using the case study approach. The recommendations are expected to provide a good policy framework for the stakeholders in the Islamic financial services industry in Malaysia.

The purpose of this paper is to explore the development of Islamic home financing and some of its practical issues. In addition, the study also intends to draw attention to some recommendations to the issues highlighted from the viewpoint of industrial experts.

The methodology for this study follows the qualitative research approach which aims to capture the thoughts and extensive knowledge of a few related experts in the field. Eight respondents who are mainly scholars and bankers in Islamic banking were selected for the interview purpose. A semi-structured interview was adopted to investigate a series of themes concerning the Islamic home financing in Malaysia.

In terms of development, the findings showed that a majority of the participants agreed that the Islamic banking and finance (IBF) is developing in line with its counterpart – the conventional banks. This is due to its innovation in products as well as offering a variety of financial products including home financing. Some of the practical issues highlighted by the respondents include pricing, adherence to conventional framework and interest rate movement. Islamic home financing is argued to be much more expensive and faces difficulty in working within a conventional framework. The issue of interest rate movement is also becoming a major hurdle in Islamic banking due to the absence of a proper benchmark for IBF. At present, IBF still follows the benchmark set by its conventional counterpart. Furthermore, the respondents also believed that the product of home financing, together with other financial products, are not in line with the teaching of Shariah principles and guideline. In addressing those issues, the respondents provided some suggestions to counter those problems, which include promoting Islamic home financing, particularly in terms of Musharakah Mutanaqisah (MM), ensuring the transparency of products, strengthening due diligence, legal aspect and others.

This study is limited in terms of the relatively small number of respondents used to generate its findings. Time constraint is another limiting factor of the research. Additionally, potential respondents in a higher position were unable to take part in the study. Due to these factors, the generalisation of the study’s findings will be visibly restricted.

This paper is expected to generate several practical implications. Firstly, the study’s exploration of the issues surrounding home financing will likely provide a general overview of the recent development in Islamic banking and the challenges it faces. Consequently, this will indirectly help policymakers and bankers alike to design a better policy when dealing with Islamic home financing issues. In the review of various literatures in the field, a majority of research studies were observed to mainly focus on a quantitative approach. Hence, in terms of methodological innovation, the study’s use of qualitative inquiry based on an interview method may provide a deeper understanding of the matter. The resolutions proposed by the various experts are hoped to contribute to shaping a better framework and system in Islamic and conventional home financing in Malaysia.

Despite having many literatures revealing mixed results concerning Islamic home financing, especially the Bai Bithaman Ajil and MM, addressing the issues of Islamic home financing, particularly from an expert perspective, has been lacking. The majority of research studies claim those issues from a theoretical viewpoint rather than a practical one. With this gap and lack of initiative, the current study is motivated to undertake an in-depth analysis on the issues of Islamic home financing and how to address those arising issues from an industrial expert’s point of view via a qualitative approach.

This paper aims to investigate the differences in the practice of tawarruq munazzam contracts based on personal financing products. The researcher will then analyse the said differences based on the potential for risk to occur and risk from a Shariah perspective.

This study’s methodology is qualitative, in which the data are collected through library research and field studies. The library research is conducted by examining books, articles, statutes and related circulars. From the practical aspect, field studies were conducted in an unstructured interview method with officers used in Islamic banks. The snowball method was used to determine the number of Islamic banks to be studied until no new information was obtained on the different practices of tawarruq munazzam contracts based on personal financing products.

The results show that there are differences in the practice of tawarruq munazzam contracts based on personal financing products practised by the Islamic banks studied. These differences have brought significant influence in determining the level of Shariah risk potentials and Shariah risks, respectively. The results also show that the highest number of the Shariah risk potential and Shariah risk in the Islamic financial institutions (IFIs) studied is 10 i.e. covering the issues of customer engagement, wa’ad (promise), commodity asset, gharar (uncertainty), wakalah (representative), ta’wid and gharamah, the willing but not an able debtor, qalb dayn and two prices in a transaction. Meanwhile, the least amount of the Shariah risk potential and Shariah risk in the IFIs studied is four, i.e. covering the issues of customer engagement, wakalah, the willing but not an able debtor and two prices in a transaction. Findings prove that there are opportunities for IFIs to minimise Shariah risk potential and risk in the personal financing products offered.

This study is limited to the practice of tawarruq munazzam contracts based on personal financing products practised by IFIs in Malaysia.

The differences in the tawarruq munazzam contract practice show the distinctive elements in both Shariah risk potential and Shariah risk. Therefore, the findings of this study can be a guideline for IFIs to improve the practice of tawarruq munazzam contracts, especially in personal financing products in minimising Shariah risk potential and Shariah risk.

The public confidence in Islamic banking is increasing as Islamic banks can minimise the Shariah risk potential and Shariah risk in tawarruq munazzam contracts based on the personal financing products offered.

This study analyses the differences in the practice of tawarruq munazzam contracts based on personal financing products by IFIs in Malaysia, which can impact Shariah risk potential and Shariah risk.

This paper aims to provide an analytical literature survey of selective studies on legal documentation in Islamic home financing with particular reference to Malaysia.

This study adopts the legal positivist methodology, with particular reference to inclusive legal positivism which takes into consideration the possibility of moral values challenging positive law. Within the context of this study, though positive law provides for rules that govern contractual matters in Islamic home financing, standardisation is a functionality of maslahah (or public interest) which transcends the mandatory provisions of positive law but helps to protect the interest of all stakeholders. This is analysed through a systematic literature review which aims to provide practical insights into industry practices relating to Islamic home financing in Malaysia.

This paper provides information on the standard documentation used by conventional banks and existing practices of diverse models of legal documentation in the home financing sector within the Islamic financial services industry in Malaysia. It also recognises the need for standard documentation that is not only Sharīʿah-compliant but also consumer-friendly, as the terms of any standard financing agreement ought to ensure consumer protection. There is also the need for a Shari’ah-compliant Sales and Purchase Agreement, as it forms part of the complete set of legal documentation for Islamic home financing.

It is not an exhaustive study, as it did not consider practices in other jurisdictions offering Islamic financial services and products but only focusses on Malaysia. Though one may not generalise the findings of this study, Malaysia remains a leading model and a global hub for Islamic financial services and products.

A very useful source of information on the current state of legal documentation in Islamic home financing in Malaysia and the prevailing practices in the industry, which may serve as a guide for policymakers such as the Association of Islamic Banks in Malaysia (AIBIM) to embark on a full scale project of standardisation of all the legal documentation used in Islamic home financing.

This study fulfils an identified need of standardisation of legal documentation used in Islamic home financing in Malaysia and offers practical help to policymakers and future researchers starting out on systemic reforms.

This paper aims to explore the practical role of maqasid al-Shari’ah in applying fiqh muamalat to the reality of modern banking practices. As the modern financial environment is complicated and not too conducive for Islamic banking operations, a special approach based on maqasid al-Shari’ah is needed to harmonize between revelation and reality.

The data of this study are obtained through literature and empirical data. As for the empirical, the exploratory qualitative approach is applied in which three members of the Shari’ah Advisory Council (SAC) of Bank Negara Malaysia (BNM) as well as three Shari’ah committees (SC) of Islamic Finance Institutions are selected as interviewees. As a result, several themes are defined from the interview data before they are analyzed based on the concept of maqasid al-Shari’ah.

The findings reveal that several practices are prevalent in developing Islamic banking products, including replicating conventional products to be Islamic ones, imposing wa’ad (unilateral promise) to strengthen the combination of different contracts into one product, and adopting floating rate with ibra’ (rebate) for financing price, which are needed to sustain this industry in modern financial system. In this regard, maqasid al-Shari’ah is applied to reconcile between rulings in fiqh muamalat and banking environments, so that these rulings can be adopted pragmatically without compromising Shari’ah principles.

This study has its limitations, as it focuses on the extent of the role of the maqasid al-Shari’ah in Islamic banking operations, excluding other segments of Islamic finance such as Islamic capital markets and Islamic insurance. Moreover, as data are collected from only six interviewees from SAC and SC of Malaysia, the results cannot be represented for the whole Islamic banking practices of this country.

This study provides several policy recommendations regarding the practice of the maqasid al-Shari’ah in Islamic banking. These may be useful for all Islamic finance players, including regulators and bankers in introducing policies and products in this area.

This study has the potential to enhance the confidence of the Muslim community, particularly in Islamic banking to support its existence and practices. The impact of such optimism will lead to an increase in demand for Islamic banking products, hence encouraging Islamic banking to sustain and update its activities in line with maqasid al-Shari’ah.

This paper offers a practical approach as regards to how the maqasid al-Shari’ah can play a significant role in sustaining the Islamic banking industry, particularly in circumstances that are not favorable to its progress. It is indispensable to prevent the Islamic rulings from being diverted in the name of human well-being and to avoid basing them on a literal textual approach. Moreover, as it provides empirical studies on the issue of replication, wa’ad, floating rate and ibra’, the discussion on this subject becomes more practical.