Mandatory Rebate and Unearned Profit: The Latest BBA Decision

Abstract

A recent Malaysian High Court decision in BIMB v Azhar Osman & Ors. (2010) held that Bank Islam Malaysia Berhad is not entitled to claim the full sale price under its bayʿ bi-thaman 'ajil (BBA) financing scheme as it is obliged by the implied terms of the contract to grant a ‘rebate’ or ibra’ to the customer. This decision - implying a rebate where none is expressly stated - is roiling the Islamic banking community in much the same way as Justice Wahab Patail’s decision in Affin Bank v Zulkifly b. Abdullah did in 2005. Heads are huddled in Islamic banks to decide how to address the issue that sprang from this judicial determination: customers now are entitled to a rebate on the sale price by way of contractual obligation when in the past ibra' had always been at the discretion of the bank.