Issues and Prospects of Islamic Hire Purchase Financing: Malaysian Evidence

Nurul Azma, Mahfuzur Rahman, Mohamed Albaity


Despite the popularity of Islamic hire purchase among the customers as an alternative for conventional hire purchase, the criticism especially on issues pertaining to its legitimacy and validity should not be overlooked. This study  therefore, aims to highlight several issues and prospects of Islamic hire purchase Ijarah Thumma al Bai’ (AITAB) in Malaysia and subsequently, provides a comprehensive exploratory study on the various ways to have a better and more legitimate structured AITAB in financial institutions. Descriptive and analytical research method had been applied in this study to analyze the collected data. The findings point out the limitations of AITAB implementation such as Shari’ah framework, ownership, maintenance responsibility, deposit payment, penalty in case of default, intention and lack of understanding of parties, signing of two separate documents in sequence, and interest-based calculation of profit. The findings also indicate the endless prospect of AITAB in Malaysia due to its strong public acceptance, competitiveness, and religious inclination. It is hoped that issues pertaining to Islamic hire purchase can be resolved through having Shari’ah regulation. Therefore, efforts should be strengthened to offer practicable solutions to help provide better and more legitimate structured implementation of Islamic hire purchase in financial institutions.

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Journal of Management Research ISSN 1941-899X


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