Hire Purchase Case Study

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CHAPTER 1: INTRODUCTION 1.1 Introduction There are two types of hire-purchase financing offered by banks specifically conventional hire- purchase and Islamic hire- purchase in Malaysia. The banking system in Malaysia is regulated by the central bank, Bank Negara Malaysia (BNM), a regulatory and supervisory bodies. The statutes applicable to both Islamic and conventional banks and financial institutions are the Banking and Financial Institutions Act 1989 (Act 372) (BAFIA) and the Islamic Banking Act 1983 (Act 276)/ (IBA). Conventional banking is basically based on the debtor and creditor relationship between the depositors and the bank on one hand and between the borrowers and the bank on the other. Interest is considered as the price of credit, reflecting the opportunity cost of money. Although, Islamic law considers a loan to be given or taken, free of charge, to meet any contingency. Therefore in Islamic banking the creditors should not take advantage of the borrower. When money is lent out based on interest, more often that it leads to some kind of bias. In Malaysia, the law on hire- purchase is synchronized by the Hire- Purchase Act 1967 (HPA) (Act 212), as amended by the Hire- Purchase (Amendment) Act 1976, and more recently by the…show more content…
The verse which describes the story of the Prophet Musa as being hired by his father in law for a certain period of time is normally quoted to support ijarah contract. Allah says: And said one of them (the two women): "O my father! Hire him! Verily, the best of men for you to hire is the strong, trustworthy". He said: "I intend to wed one of these two daughters of mine to you, on condition that you serve me for eight years, but if you complete ten years, it will be (a favour) from you. But I intend not to place you under a difficulty. If Allah will, you will find me one of the righteous." (Al- Qasas: 26-27). This verse is a clear indication of Ijarah as Musa as hired for a specific period of time with specific

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