Hire Purchase Under Shirkah al-Milk (HPSM) in Islamic Banking and Finance: A Shari'ah Analysis

Preface I
Preface II
Contents
Abbreviations
List of Figures
Chapter 1 Historical Development and Permissibility of HPSM
	Abstract
	1.1  Development History of the HPSM Contract
	1.2  Legality of HPSM
	1.3  Stages of HPSM
		1.3.1  Purchasing Property Under Shirkah al-Milk
		1.3.2  Transformation into Ijarah Contract and Underlying Issues
		1.3.3  Transfer the Legal Title Through Ijarah Muntahiyyah bi al-Tamlik
	1.4  Shari’ah Requirements, Essential Elements, and Conditions of HPSM
	1.5  Differences Between Islamic and Conventional Hire Purchase
	1.6  Problem-Based Question with Solution
	References
Chapter 2 Shirkah: The First Contract in HPSM
	Abstract
	2.1  Characteristics of Shirkah or Musharakah Agreement
	2.2  What Is Shairkah or Musharakah
	2.3  Authenticity of Musharakah or Shirkah
	2.4  Types of Shirkah
	2.5  Modern Classifications of Musharakah or Shirkah Contract
	2.6  Significant Shari’ah Standards of the Shirkah Agreement
	2.7  Mandatory Requirements of a Shirkah Contract
	2.8  Major Applications of Musharakh in the Modern IBF Industry
		2.8.1  Project Financing
		2.8.2  Securitisation of Musharakah
		2.8.3  Single Transaction Financing
		2.8.4  Financing for Working Capital
	2.9  Dispute Over Musharakah and Responses
		2.9.1  Possibility of Incurring a Loss
		2.9.2  Fraudulence
		2.9.3  Issue with Business Privacy
		2.9.4  Issue with Client’s Unwillingness to Share Profits
	2.10  Application of the Above Using an Example Case Study
	References
Chapter 3 Ijarah: The Second Contract in HPSM
	Abstract
	3.1  What Is an Ijarah Contract?
	3.2  Authenticity of Ijarah
	3.3  Classification of Ijarah
		3.3.1  Types of Ijarah Based on Its Subject Matter
		3.3.2  Ijarah Pertaining to Its Contractual Features
	3.4  Elements and Conditions for an Ijarah Contract
	3.5  Shari’ah Standards of Ijarah
		3.5.1  Security Deposit in Ijarah
		3.5.2  Issues of Lease Back to the Lessor Based on Spot Dealing
		3.5.3  Issues While Customer Acts as an Agent in the Ijarah Contract
		3.5.4  Issues Related to the Advance Rental and Asset Delivery
		3.5.5  Multiple Ijarah Agreement
		3.5.6  Usage Rules of the Asset
	3.6  Ijarah as a Mode of Financing and Its Underlying Hindrances
	3.7  Application of the Above Using an Example Case Study
	References
Chapter 4 Sale: The Final Contract in HPSM
	Abstract
	4.1  Understanding of Sale (Bay’)
	4.2  Authenticity of Sale Contract
	4.3  Sale Contracts and Their Nature
	4.4  Types of Sale Contracts
		4.4.1  Sahih or Valid Sale Contract
		4.4.2  Batil or Invalid Sale Contract
		4.4.3  Defective or Fasid Sale Contract
		4.4.4  Makruh or Reprehensible Sale Contract
		4.4.5  Mukhtalaf Fih or Disagreed Sale Contract
	4.5  Types of Sale Contracts in Terms of Goods Exchanged
		4.5.1  Barter Trade (Bay’ al-Muqayadah)
		4.5.2  Exchange Sale (Bay’ al-Sarf)
		4.5.3  General Sale (Bay’ al-Mutlaq)
	4.6  Classifications of Contract Based on Mode of Payment
		4.6.1  Spot Sale
		4.6.2  Deferred Payment Sale (Bay’ Bithaman Ajil)
		4.6.3  Bay’ al-Salam
	4.7  Other Modes of Sale Contracts
		4.7.1  Bargaining Sale
		4.7.2  Trust Sale (Bay’ al-Amanah)
	4.8  Prohibited Sale Contracts in Islamic Financial Transactions
		4.8.1  Bay’ al-Hasat
		4.8.2  Bay’ al-Mulamasah
		4.8.3  Bay’ al-Munabadhah
		4.8.4  Bay’ al-Muwasafah
		4.8.5  Bay’ al-Muzabanah
		4.8.6  Bay’ al-Mukhadarah
		4.8.7  Bay’ al-Haml
	4.9  Types of Mukhtalaf Fih or Disagreed Sale Contracts
		4.9.1  Deposit or Earnest Money (Bay’ al- ‘Urbun)
		4.9.2  Debt Sale (Bay’ al-Dayn)
		4.9.3  Buy Back Sale (Bay’ al- ‘Inah)
		4.9.4  Tripartite Sale (Bay’ al-Tawarruq)
	4.10  Essential Elements for Sale Contracts
	4.11  Essential Elements and Conditions for Sale Contract in HPSM
	4.12  Application of the Above Using an Example Case Study
	4.13  Problems and Solutions for the Example Case Study
	References
Chapter 5 Operational Procedure of HPSM
	Abstract
	5.1  Initial Stage of Entering into the Contract
	5.2  Process of Proposal Classification
		5.2.1  Hire Purchase Under Shirkah al-Milk Commercial
		5.2.2  Hire Purchase Under Shirkah al-Milk Industrial
		5.2.3  Hire Purchase Under Shirkah al-Milk Agriculture
		5.2.4  Hire Purchase Under Shirkah al-Milk for Transport or Motor Vehicles
		5.2.5  Hire Purchase Under Shirkah al-Milk Real Estate
		5.2.6  Hire Purchase Under Shirkah al-Milk Scheme
	5.3  Eligibility of Client for Finance
	5.4  Determination of the Leasing Rate and the Selling Price of the Asset
	5.5  Documentation Stage for Security Options
	5.6  Categorisation of the Businesses to Finance
	5.7  Rent Payment Schedule and Proposed Selling Price
	5.8  Progression Phase
	5.9  Insurance or Takaful in HPSM Contract
	5.10  Guarantor in HPSM Contract
Chapter 6 Accounting Treatment in HPSM Contract
	Abstract
	6.1  Accounting Entries Stages of Investment on Islamic HPSM
	6.2  Accounting Entries Methods of Investment in Conventional Hire Purchase
		6.2.1  1st: Cash Price Method
		6.2.2  2nd: Interest Suspense Method
		6.2.3  3rd: Trading Method
		6.2.4  4th: Stock and Debtor Method
	6.3  Conclusion
Chapter 7 Ownership Transfer and Shari’ah Issues in HPSM
	Abstract
	7.1  Procedures for Transferring the Ownership After Ijarah Tenure in HPSM
		7.1.1  Transferring the Ownership Through a Gradual Sale
		7.1.2  Transferring the Ownership Through a Gift (Hibah) Contract
			7.1.2.1 Shari’ah Issues in a Gift (Hibah) Contract with Stipulations
		7.1.3  Transferring the Ownership in Exchange for a Token Amount
		7.1.4  Transferring the Ownership by Paying a Specified Amount
		7.1.5  Transferring the Ownership by Paying an Equivalent Amount of Remaining Rental Instalment Before Ending the Lease Contract
	7.2  Issues Related to Sale with Condition(S) in Shari’ah
	7.3  Issues with the Legal Status of Wa’d in a Sale Contract
	7.4  Issues with Two Contracts in One in HPSM
		7.4.1  Hadiths About the Issue of Two Contracts in One
		7.4.2  Jurist’s Dispute over the Interpretation of Those Hadiths
		7.4.3  Mitigating Dispute over Combination of Multiple Contracts in One
	References
Chapter 8 Ijarah and Shirkah Contracts In Islamic Finance
	Abstract
	8.1  Musharakah Mutanaqiasah Partnership (MMP)
		8.1.1  The Implementation Process of the MMP Contract
		8.1.2  Acceptability of MMP
		8.1.3  Advantages of an MMP Contract
		8.1.4  Disadvantages of an MMP Contract
	8.2  Bay’ bi Thaman Ajil (BBA) (Sale on Deferred Payment)
		8.2.1  The Implementation Process of the BBA Contract
		8.2.2  Acceptability of BBA Contract
		8.2.3  The Major Issues Behind Dispute Over a BBA Contact
	8.3  Ijarah Mawsufah Fi al-Dimmah (IMD) (Forward Ijarah)
		8.3.1  The Implementation Process of the IMD Contract
		8.3.2  Acceptability of the IMD Contract
		8.3.3  Basic Standards for an IMD Contract
		8.3.4  Risks that Encounter the IMD Contract
	8.4  Ijarah Sukuk
		8.4.1  Implementation Process of Ijarah Sukuk
		8.4.2  Characteristics of an Ijarah Sukuk
		8.4.3  Issues that Hinder the Ijarah Sukuk
	8.5  Musharakah Sukuk
		8.5.1  Basics of a Musharakah Sukuk
		8.5.2  Issues with Musharakah Sukuk
	References
Chapter 9 Hybrid Contracts and Issues in Islamic Finance
	Abstract
	9.1  What Is a Hybrid Contract
	9.2  Legal Status of a Hybrid Contract
	9.3  Shari’ah Obligations in a Hybrid Contract
	9.4  Shari’ah Concessions in Combined Contracts
	9.5  Other Issues in the Contemporary Application of Hybrid Contact
	References
Chapter 10 Conclusion
	Abstract
	References
References
Index