Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/302017 
Authors: 
Year of Publication: 
2021
Citation: 
[Journal:] ISRA International Journal of Islamic Finance [ISSN:] 2289-4365 [Volume:] 13 [Issue:] 3 [Year:] 2021 [Pages:] 378-389
Publisher: 
Emerald, Bingley
Abstract: 
Purpose - 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. Design/methodology/approach - 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. Findings - 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. Research limitations/implications - The paper focuses only on the fixed profit rate rebate computation proposed by BNM guidelines. Practical implications - 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. Originality/value - 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.
Subjects: 
Bayʿ al murābah˙ah
Daʾ wa taʾajjal
Ibrāʾ
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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