Name:

Student I.D:
Class: Islamic Economic Finance
Class I.D:
Faculty: DR Abdullah
Assignment no: 3
Answer 1:
Case 1: Unique good company: In this revision of letter was send to customer for
revision of kibor rate to 6% as kibor rate fall down from 12% to 6% while floor
was 10%. This create some uncertainty (Gharar) for customer and this will be
treated as voidable contract because as the floor was set to 10% and if bank send
letter to decrease it to 6% so customer have write to terminate contract.
Case 2: Mr Shahzaib Khan: The car was stolen from Mr Shahzaib khan which
was taken on ijarah by Ace Islamic bank the advance rental 160500 was delayed to
return to Mr Shahazib khan By ace Islamic bank as Five Star takaful was during
some verification of incident for that time Islamic bank hold the payment this is
valid but as when takaful is paid so contract is automatically finish as car now not
exist so payment should be return.
Case 3: Mr Yasir Alvi: Charity as compensation for late payment of rental
payment was not paid by Mr Yasir Alvi during no objection certificate and transfer
of ownership by gift deed. Although it’s moral obligation to fill its promise but if
Mr Yasir Alvi did not paid the charity the contract can be voidable as if bank feel
he is not fulfilling his promise to do charity as compensation of late payment.
Answer 2: Before the ijarah contract is executed it is made sure that the ownership
of the asset is owned by the bank and Some sharia compliant issues which were
highlighted by sharia audit team was that the ownership transfer from bank to
customer was done after ending of the ijarah contract and all the dues were paid of
the ijarah. Also sharia audit team made sure that the charity which was collected by
the bank for late payment should be taken with proper notice which mention
collection of charity. Also it should made sure that bank should set a cap and floor
between kibor rate so price should not fluctuate much. Moreover if the car is
damage and is not used by the customer so bank cannot take the rent from the
customer and all insurance expenses of car will be paid by the bank and during
advance booking of ijarah if customer cancel the contract bank cannot charge
profit or penalty from it. Also if the rental agreement is revise it should be properly
communicated to customer by the bank and after bilaterally accepted by the both
parties after that only contract will be revise.
Answer 3: There are few possible treatment of advance rental parked with ace
Islamic banking during takaful claim process among that first one is that that
advance payment should be kept separate from other payments as we can’t charge
any kind of profit, benefit or interest from it and wait for the takaful claim process
because this advance rental payment is liability for ace Islamic banking and on
liability we can’t charge interest on it. Also if the five star takaful during takaful
claim process claim that it was negligence or mistake of the customer so that same
advance payment can be use by bank for recovering the damages. This can be only
done when it is proven that it was negligence or mistake of customer.

Answer 4: The ace Islamic bank have to place ceiling and floor over the
benchmark rate when car financing is issued this is because if the price ceiling or
floor is not implement and benchmark fluctuates so this will create lot of
uncertainty (gharar) which is no consider good in the light of Islamic banking.
Generally conventional banks leasing them do not put price ceiling or floor
because they want to earn maximum profit or interest in it meanwhile Islamic bank
work on profit and lose basis that’s why they put ceiling and floor. If Islamic banks
want to change the agreed rate so they should conveyed this to customer and if
customer agrees then bilaterally they can change the rate in the ijarah agreement
but it’s not encourage in Islam.
Answer 5:
Under taken of purchase: If we talk in the context of Islamic banking so in
murabah the asset is purchase by customer where bank as owner sell the product to
customer in cost plus profit and also make sure cost and profit is known to the
customer. In this the title of ownership is transfer to customer and make sure that
customer pay all amount either in installment or lump sum. The murabha cannot be
cancel as asset have been transfer to customer. Murabha is not the financing tool.
Undertaking of lease: In undertaking of lease the Islamic ijarah concept applies
and the Islamic bank give the asset to customer in rent and after the rent is
completed the Islamic bank gift the car to customer and also during the period of
rent if car is damage and it’s not the negligence of customer then Islamic bank
have to bear the cost and if customer want to cancel the rental agreement he can
cancel the rental agreement. Concept of Ijarah is kind of Islamic rental system and
financing tool in Islamic way.