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HSBC Alternative to Mortgage in UK

Answered as per Hanafi Fiqh by Daruliftaa.com

I have a question regarding the new ‘halal mortgage’ scheme by the HSBC bank in UK. I’ve heard that many scholars have said it’s permissible because of Ijarah and Muharabah and previously Mufti Taqi Usmani has called this type of loan permissible, though I am not certain. I have also heard that Shaykh Yaqoobi has not approved it. Can you please elaborate on this. And also can you please explain Ijarah and Muharabah.

ANSWER

In the name of Allah, Most Compassionate, Most Merciful,

Shaykh Mufti Taqi Usmani (Allah preserve him) along with two other scholars, Shaykh Nizam al-Ya’qubi (Bahrain) and Dr. al-Ghari (Saudi Arabia) have approved of the HSBC house financing scheme known as the Amanah House Financing. The house purchasing plan offered by HSBC is based on the Ijara plan. They don’t offer the Murabaha plan.

There are detailed explanations on both Murabaha and Ijara, and it is not possible to explain them in detail here, but in a nutshell, Murabaha is when the bank or financial institution purchases the house and then sells it to the client at a higher price on deferred payment. Ijarah is when the bank and the client both jointly purchase the house, and the client pays rent to the bank for its share and also payment in instalments towards the purchase of the house, until finally, the client pays the entire price of the bank’s share, and the rent paid over this period would be the bank’s profit.

For more details, you may refer to Mufti Taqi Usmani’s book “An Introduction to Islamic Finance” (available online).
And Allah Knows Best

[Mufti] Muhammad ibn Adam
Darul Iftaa
Leicester , UK

This answer was collected from Daruliftaa.com, which is headed by Mufti Muhammad ibn Adam Al-Kawthari. He’s based in the United Kingdom.

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