Auto Financing In Islamic Banks

Dealing of Islamic Bank

Asset financing Other Services

Services
Money
Dubai Islamic House
Interest is Finance
Bank prohibited
Meezan Bank according to
Faysal Bank Islamic Shariah Auto
MCB etc Finance

Machinery
 Asset financing/ijarah

• To give something on rent

“A legal binding contract, where the owner of

something with value, transfers its usufruct to
another party, for a pre-defined period, in exchange
of an agreed consideration.”
 Ijarah/Asset Finance

What is Usufruct? • To enjoy the use and advantages of another’s property.

Types of Ijarah
Mechanism of Auto Financing in Islamic
Banks
Mechanism of Auto financing in Islamic Banks
 Basic Rules for Auto Financing

Amount of Rental
• Agreed in advance in an
unambiguous manner.
• Different Amounts of Rentals
• Increasing rent

Termination
• Contract will be terminated, if asset ceases
to give service for which it was rented

Assignment of Lease Rentals

Not permissible, except at par value
value
 Basic Rules for Auto Financing Contract

Ownership of Corps of Leased

• Remains Ownership
• Usufruct is transferred
Title of Ownership
• Retain title to assets
• Bear all risks and rewards

Commencement of Lease Rentals

• Lease rentals until asset is delivered
 Insurance for Auto Financing

Termination
Termination of lease before expiry
with the mutual consent
Insurance
 Takaful of leased asset in the name of
lessor
 Cost of insurance borne by lessor
 Types Of Islamic lease

Gift Sale Deed Diminishing Musharakah

• No consideration • Token consideration • Gradual transfer
• Price specified
• Remaining Amount
if lease is terminated earlier
ISLAMIC BANKS AUTO FINANCE FACILITY