X Close

Archives

Published: Tuesday October 13, 2009 MYT 11:22:00 AM
Updated: Tuesday October 13, 2009 MYT 12:55:36 PM

Bank Negara must help defaulters of Islamic banking: CAP

GEORGE TOWN: Bank Negara Malaysia should help defaulters of the popular ‘Bai Bithaman Ajil’ (BBA) home financing so that consumers who have put their faith in Islamic financing are not short changed.

Consumer’s Association of Penang (CAP) president S. M. Mohamed Idris said presently the defaulters ended up worst than defaulters of other conventional housing loans as BBA was an Islamic home financing where interest was not allowed to be charged.

International Islamic University Malaysia’s Dean of the Institute of Islamic Banking and Finance Prof Ahmed Kameel Mydin Meera said under the BBA, the borrower was initially deemed to have sold the property to the bank under the loan agreement.

“This poses potential problems when the property is still under construction. The consumer then ‘buys the property back from the bank at a very much higher price as it includes the profit element for the bank (known as the Bay al-Inah concept).

“The consumer then makes monthly payments based on the price sold to him by the bank,” he told a press conference at CAP office here Tuesday.

Prof Ahmed said as the BBA was a sales contract that included profit, the borrower could in the event of a default, owe more than the original financing amount taken.

“A few of the customers who were unhappy with the astronomical sums they were asked to pay have taken their banks to court,” he added.

He added, in 2008 High Court judge Datuk Abdul Wahab Patail had argued that the BBA sale was not a genuine sale as the profit charged by the banks was nothing more than the interest payment in a conventional loan.

“Since the profit element of the BBA was a sham, the contract had gone against Shariah principles.

“However in April 2009, the Court of Appeal ruled that the BAA contract is shariah compliant and therefore binding. It also stated that the BBA is a sales transaction and should not be compared to a loan transaction,” he added.

Mohd Idris urged Bank Negara to protect Islamic banking by regulating the rebates the banks could give to BBA defaulters so that their outstanding balance could be significantly reduced given the current global financial meltdown where more people were expected to default on loans in the coming months.

advertisement

  1. MH17: Malaysia quietly worked back channels to secure bodies, black boxes
  2. Motorists to enjoy highway toll discounts this Hari Raya
  3. ‘Our lives turned upside down in a day’
  4. Ukrainian villagers recall how victims dropped onto streets and houses
  5. Land for family but there’s no family
  6. Greek Orthodox church in Gaza shelters Muslims fleeing war
  7. Lorry slams into cars, catches fire at Sunway toll booth on Kesas Highway
  8. MH17: Najib's 'silent diplomatic' approach worked, says NYT
  9. MH17: Opposition leaders laud Najib's quiet diplomacy
  10. Kiki fined RM5,000 for causing mischief and damage

advertisement

advertisement