I was looking at the Amanah Shariah Home Finance in Australia. It is based on Ijarah. I would appreciate if you could go through the various links on the website and see whether it is Islamic and Shariah Compliant. As I intend to finance a home from there if it is. http://amanah.com.au/how-it-works/ http://amanah.com.au/how-are-you-protected-under-australian-law/ http://amanah.com.au/shariah-qualification/ It is mentioned that “Our home financing solutions are endorsed by leading Islamic finance scholars such as Dr Mufti Imran Usmani who has studied under and works under the supervision of Justice (ret) Mufti Taqi Usmani.”
In the Name of Allah, the Most Gracious, the Most Merciful.
As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.
There are three aspects necessary to determine Shariah compliancy of a product.
1) The concept
2) The contract
3) The implementation
The details on the website merely explain the concept. The concept which this housing scheme follows is that of Ijarah. You may forward the contract to us for our observation. Hereunder are some of our observations on the concept as found on the website. You may seek clarity on the following points from the financing company.
a) In the Amanah Wakalah agreement, the Financier represents, and the Customer acknowledges, that the rental payments are set at a level which allows the Customer to also pay all amounts in respect of the property. In addition, under its obligations associated with the mortgage the Customer agrees to keep any mortgaged property in good repair and to pay all rates, taxes, and other expenses in relation to the property.
This is in accordance with Shariah.
The lessor is the owner of the property; therefore, he is required to pay expenses related to the ownership of the property. As for the lessee, then the day to day needs of the house will be fulfilled by him.
b) It is the practice in Australia for Financiers to require that the financed property be insured. These requirements exist across the world including, in Islamic banks such as at Meezan Bank in Pakistan where Takaful (an Islamically permissible form of insurance) is used.
Takaful is not available in Australia. We overcome this problem by including a term in the Wakalah Agreement which states that the Customer is purchasing the insurance on behalf of the Financier, and the Financier has adjusted the payments to include the insurance premium. This acknowledgement in relation to premium payment is expressly recognised and evidenced as a key term of the Wakalah.
From a Shariah perspective, the Amanah contracts have been drafted such that the Financier is considered as the one purchasing, and enjoying the benefit of the insurance. In these circumstances, the insurance is permissible under Shariah.
Who will be paying the actual cost of the insurance?
c) The Ijarah Financing Agreement is also accompanied by a “purchase undertaking” (or Wa’ad) from the Customer. If a Customer terminates early, the Financier will exercise this Wa’ad where the Customer promises to pay the Financier an amount equal to the balance outstanding and immediately purchase Financer’s interest.
Kindly provide clarity regarding this undertaking. What purpose does this serve?
d) In the Amanah Ijarah Financing Agreement the rental rate is not a floating rate. The Rental Rate percentage is fixed for a period. At the end of the period the customer and financier then renegotiate a further 12 month fixed rate period. If the Customer is not happy with the new rate he may terminate the agreement without any break costs.
What is the period the Ijarah has been agreed for?
You may also obtain a copy of the contract and send it to us for our observation.
And Allah Ta’āla Knows Best
Student Darul Iftaa
Checked and Approved by,
Mufti Ebrahim Desai