IMPLEMENTATION OF MUÑÓMALAH HIRE-PURCHASE BILL IN MALAYSIA: CHASING A MIRAGE?

Abstract

Islamic hire-purchase (Al-Ijūrah Thumma Al-Baiʿ or AITAB) is one of the innovative products of Islamic banks in Malaysia. Since its first inception more than 10 years ago, AITAB has been governed by the Hire- Purchase Act 1967 (hereinafter referred to as ‘the HPA’). Notwithstanding the surge in popularity of AITAB amongst the general public, the product has received much criticism due to its inherent limitations especially with regard to its regulatory framework. Critics of AITAB posit the inherent limitation of the HPA to effectively and efficiently govern AITAB transactions particularly when dealing with Sharîʿah issues. Consequently, Muʿāmalah Hire-Purchase Bill had been proposed to the Malaysian government to overcome certain limitations of the HPA. The issue was, whether AITAB would be best governed by having an independent regulation (known as Muʿāmalah Bill), or by simply incorporating Sharīʿah principles within the existing regulation (HPA). Unfortunately in recent years, the Attorney General has rejected the idea of an independent Muʿāmalah Bill due to certain factors. To better comprehend the rationale for this rejection, this paper discusses the overall regulatory framework of AITAB operations in Malaysia based on 46 expert interviews. In particular, the paper provides important insights into the advantages and disadvantages of implementing either a distinct Muʿāmalah Bill or harmonising the existing HPA with Sharīʿah principles of hire-purchase.