As regards the Murabah contract in car purchasing offered by the Arab Islamic Bank, the Bank`s delegate told me about this particular transaction, and I realized that the Bank doesn`t possess the car and the car seller transfers the ownership of the car directly to the purchaser. As far as I know, this is Riba (Usury). Could you review this Murabaha contract and tell me whether it is permissible or not?
Answer:
Praise be to Allah, the Lord of the Worlds; may His blessings and peace be upon our Prophet Mohammad and upon all his family and companions.
In our website, we have pointed out that the Murabaha contract of the Arab Islamic Bank is free from violations of Sharia and that it is permissible to deal with it so long as the Bank`s clerk adheres to the conditions of Islamic Murabaha.
As for the Bank`s offer whereby the clients pay the ownership transfer fees once (. I.e. the transfer is conducted between the seller and the Bank`s client directly), this is permissible and there is nothing wrong with it. However, this is provided that an official contract of sale is conducted between the first seller of the car and the Bank and a similar one between the Bank and the second buyer (Client). This is under the consideration that the ownership transfer between the seller and the Bank is concluded through offer, acceptance, and the signed documents between them. The Bank takes possession of the car, from its original owner, in line with the rules of Sharia in this regard, then sells it to the client via a separate contract and the ownership of the car is directly transferred to the client to avoid paying the transfer fees more than once.
In fact, transferring the ownership takes place at the Traffic Department to establish the rights of the contracting parties and the valid contract is that which entails rights and has impacts on these parties and rests on offer and acceptance, which makes Murabaha transaction valid. And Allah the Almighty knows best.