Question Summary:
Can a person buy a car via Meethaq Islamic Bank’s financing?

Question Detail:

Assalaamu Alaikkum wa rahmathullahi wa barakaathuhu. I am from India and I work for a company in Muscat, Oman. I have an account with Meethaq Islamic Bank in Oman. I would like to buy a car via Meethaq Islamic Bank's financing. Can you please guide me whether it is permissible to take up their financing. Link is given below. http://www.meethaq.om/Meethaq-Cars.html

Answer :

In the Name of Allah, the Most Gracious, the Most Merciful.
As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh
In determining Sharia compliance of a product, it is important to consider three issues:
1] The concept
2] The contract
3] The implementation
In the link provided, the mere concept of Meethaq Car Financing Product is stated. That is not sufficient for us to comment on the Sharia compliancy of Meethaq Car Finance. Assuming the contract is Sharia compliant, the implementation of the rules of the product is equally important. You may obtain the contract of Meethaq Car Finance and send to us for our observations. Nevertheless, hereunder are the general rules of a Murabaha Financing Product.
1] The client and the Bank sign an over-all agreement whereby the Bank promises to sell and the client promises to buy the car.
2] When the car is required by the customer, the Bank appoints the client as his agent for purchasing the car on its behalf and an agreement of agency is signed by both the parties
3] The client purchases the commodity on behalf of the Bank and takes the possession as an agent of the Bank
4] The client informs the Bank that he has purchased the commodity on behalf of the bank and at the same time, makes the offer to purchase it from the Bank
5] The Bank accepts the offer and the sale is concluded whereby the ownership as well as the risk of the commodity is transferred to the client
All these five stages are necessary to effect a valid Murabaha. If the institution purchases the commodity directly from the supplier [which is preferable], it does not need any agency agreement. In this case, the second phase will be dropped and at the third stage the institution itself will purchase the commodity from the supplier and the fourth phase will be restricted to making an offer by the client.
The most essential element of the transaction is that the commodity must remain in the risk of the Bank during the period between the third and the fifth stage. This is the only feature of Murabaha which can distinguish it from an interest-based transaction. Therefore, it must be observed with due diligence at all costs, otherwise the Murabaha transaction becomes invalid according to Sharia.
It is also a necessary condition for the validity of murabahah that the commodity is purchased from a third party. The purchase of the commodity from the client himself on ‘buy back’ agreement is not allowed in Shariah. Thus, murabahah based on ‘buy back’ agreement is nothing more than an interest based transaction.
 [Introduction To Islamic Finance- page 107- Maktaba Ma’ariful Quraan]
And Allah Ta’āla Knows Best
Ridwaan Ibn Khalid Esmail [Kasak]
 
Student Darul Iftaa
Katete, Zambia

Checked and Approved by,
Mufti Ebrahim Desai.