Fatwa ID: 02301
Answered by Mufti Muhammad Adnan
Could you please shed some light on Bank Al-Rayyan housing scheme. Is it permissible to buy a house through this scheme?
There are 2 comflicting fataawa for Al-Rayan Bank. First fatwa is by the esteemed world renowned Darul Ifta Camperdown (askimam.com) http://askimam.org/public/question_detail/34682
We have studied the process guide of the Home Purchase Plan offered by Al-Rayan Bank of UK. We observe that the purchase plan is based on the diminishing partnership model which entails
- Joint partnership of the assets between Al-Rayan Bank and its “client”.
- Ijarah (leasing) to occupy the Banks share
- Purchase of Al-Rayans Share by the client in the future
We understand the offering letter is for the following:
- Diminishing Co-ownership Agreement
- Leasing Agreement
- Service Agency Agreement
- Legal Charge
Each one of these transactions mentioned above is permissible. However, combining these transactions in a single transaction is impermissible . And combining them together by making each one of them a condition to the other is also impermissible .
However, we do not understand what is the service agency agreement. Since this is a partnership, the partners are bound to pay for their expenses pro-rata. This includes the legal charge. It is thus incorrect to impose all charges only onto the client. Hence the condition on page 17 “ You will also be required to pay for the cost of Al Rayan Bank`s solicitors” is an invalid condition and therefore impermissible.
Furthermore, in a diminishing partnership agreement, there will be sale of units until the client becomes the owner of the house. How and when will this agreement be done? That is not stated in the Home Purchase Plan.
Hereunder is the correct procedure to execute a diminishing partnership deal :
- At the time of signing the contract of purchase, the client may sign a one-sided promise to purchase different units of the share of the financer (which in this case is the bank) periodically and the financier may undertake that when the client will purchase a unit of his share, the rent of the remaining units will be reduced accordingly.
- At the time of purchase of each unit, ijab (offer) and qubool (acceptance) must take place at that particular date
- The price of the unit can be mutually agreed and can also be the market value of that house prevalent on that day.
And Allah Ta’āla Knows Best
Student Darul Iftaa
Checked and Approved by,
Mufti Ebrahim Desai.
The second fatwa is by a former student of Darul Ifta camperdown, Hadhrat Shaykh Mufti Faraz Rabbani(May Allah Ta’ala shower him with mercy and protect him)
The Home Purchase Plan products offered by al Rayan Bank have been signed off as Shariah compliant by Al Rayan’s Sharia Supervisory Committee. This includes competent and reputable Shariah scholars in the Islamic Finance industry such as Sheikh Dr Abdul Sattar Abu Ghuddah, Sheikh Nizam Muhammed Saleh Yaqoobi and Mufti Abdul Qadir Barkatulla. One may follow their approval and use the services of al Rayan Bank.
Product development and Shariah advisory on Islamic finance products is a very specialised industry. To sign off a product as Shariah compliant or to reject the Shariah compliancy of any product requires a number of expertise. One needs to have knowledge, proficiency and literacy in at least the following areas:
1) Fiqh al-Mua’malāt (Transactional laws of Shariah)
2) Usul al-Fiqh
3) Regulation and governance
5) Experience in the financial industry
6) Understanding of legal issues in the jurisdiction of operations
Therefore, the above scholars are reputable and well-grounded in Islamic finance and other necessary areas for practice. One may follow their approval and use the facilities of al Rayan Bank. Some issues may not be understood by all or may be open for debate, nevertheless, as it is an issue of ijtihad and reasoning, you may follow their approval and certification.
And Allah Ta’ālā Alone Knows Best
Mufti Faraz Adam al-Mahmudi,
5th December 2016
The conclusion of Darul Ifta Birmingham is that Ar-Rayan bank’s mortgage scheme should be avoided, but it is better than going to a normal non-islamic bank. One should avoid it but as a LAST and FINAL resort (i.e this mortgage stands against another non-islamic bank’s mortgage) you may follow the opinion of Mufti Faraz Adam al-Mahmudi(May Allah Ta’ala preserve him). Taqwa denotes avoidance but the fatwa is also there if it’s an absolute necessity.
Written by Molana Muhammad Adnan
Checked and approved by Mufti Mohammed Tosir Miah
Darul Ifta Birmingham