The SAC, in its first meeting dated 8 July 1997 and 36 th meeting dated 26 June 2003, has resolved that the application of the AITAB concept in vehicle financing is permissible, subject to the following conditions:Ĥ 4 i. In this regard, the SAC was referred to on the issue as to whether the application of AITAB in the aforesaid vehicle financing is allowed by the Shariah. If the customer opts to purchase the vehicle, the Islamic financial institution and the customer will conclude a sale contract and the ownership of the vehicle will be transferred from the Islamic financial institution to the customer. Upon expiry of the lease period, the customer has the option to purchase the vehicle from the Islamic financial institution. Subsequently, the Islamic financial institution will lease the vehicle to the customer for a specified period. Under this agreement, the Islamic financial institution will appoint the customer as an agent to purchase the vehicle identified by the customer. At the initial stage, the Islamic financial institution will conclude an ijarah agreement with the customer. The financing based on AITAB involves two types of contracts, namely leasing contract (ijarah), followed by sale contract (al-bai`). Application of al-ijarah thumma al-bai` in Vehicle Financing There has been a proposal by an Islamic financial institution to introduce vehicle financing based on al-ijarah thumma al-bai` (AITAB) concept. There are also financing products that enable customers to lease assets from Islamic financial institutions with an option to acquire the leased assets at the end of the lease tenure based on the concept of ijarah muntahia bi al-tamlik or al-ijarah thumma al-bai`. In the context of Islamic finance, the ijarah concept is usually applicable in financing contracts such as in real property financing, vehicle financing, project financing and personal financing.

3 IJARAH 3 Ijarah refers to a lease or commission contract that involves an exchange of usufruct or benefits of an asset or a service for rent or commission for an agreed period.

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