Islamic Finance
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Financing purchase of a car
Question
Is it permissible to finance a car purchase through leasing in Mauritius?
Answer
The ruling depends on the actual structure and terms of the agreement. A vehicle-leasing arrangement may be permissible, or it may be prohibited.
A lease – Ijaarah - is not a sale. Under a genuine lease, the finance company remains the legal owner of the vehicle and gives the client the right to use it for an agreed period in return for a clearly specified rent.
Many conventional “finance lease” agreements offered in Mauritius resemble interest-based vehicle financing more than genuine Ijaarah. They may transfer substantially all ownership risks to the client while allowing the finance company to retain legal title as security. Such an arrangement is not Shari’ah -compliant merely because it is described as “leasing.”
Therefore, Muslims should not judge a financing arrangement by its name alone. They should obtain and submit the complete agreement for qualified Shari’ah review before signing it.
We understand that Rogers Capital offers a separate product named Ijaarah. In our view, this product is at least acceptable and can be considered a valid alternative.
A lease – Ijaarah - is not a sale. Under a genuine lease, the finance company remains the legal owner of the vehicle and gives the client the right to use it for an agreed period in return for a clearly specified rent.
Many conventional “finance lease” agreements offered in Mauritius resemble interest-based vehicle financing more than genuine Ijaarah. They may transfer substantially all ownership risks to the client while allowing the finance company to retain legal title as security. Such an arrangement is not Shari’ah -compliant merely because it is described as “leasing.”
Therefore, Muslims should not judge a financing arrangement by its name alone. They should obtain and submit the complete agreement for qualified Shari’ah review before signing it.
We understand that Rogers Capital offers a separate product named Ijaarah. In our view, this product is at least acceptable and can be considered a valid alternative.