Sharia Non-Compliance Risks in Islamic Leasing Finance
Explore the risks of Sharia non-compliance in Ijarah products within Islamic leasing finance, including major violations and ways to mitigate those risks. Gain insights into the structure, process, and key considerations to ensure adherence to Sharia principles.
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Presentation Transcript
Presented By: Sadaqat Khan, Senior Ex cutive VP Head of Sharia Advisory, Audit, Compliance & Ex cution AlHuda Centre of Islamic Banking & Economics (CIBE) ISLAMIC LEASING FINANCE IJARAH SHARIAH AWARENESS SESSION ON Sharia Non-Compliance Risk under Ijarah Product
Islamic leasing Ijarah Finance Shariah Compliant Product Structure & Process Promise to Lease by the Customer Purchase of Asset by the IFI: Payment of price and possession (Ownership) of the assets by IFI Execution of Lease Agreement: Between IFI and Customer for agreed Lease Period & Rental terms. Payment of Rentals by Customer to IFI : During the lease term, includes Fixed & Variable Rental, as agreed. Transfer of Asset ownership to Customer: At the end lease period by way of sale or gift deed.
Islamic leasing Ijarah Finance Sharia Non-Compliance Risk under Ijarah Product Major Sharia Violations - 1/2: Ijarah Asset is used for Sharia repugnant business Ijarah agreement signed, but incomplete or blank. Lease Period / Terms not mentioned in the Ijarah agreement. Rental rate linked with Benchmark, but without ceiling (mini/maxi). Starting Variable and Fixed Rental, prior to purchase & delivering the asset to lessee.
Islamic leasing Ijarah Finance Sharia Non-Compliance Risk under Ijarah Product Major Sharia Violations - 2/2: Purchase and lease back financing without executing two separate contracts; i.e. Asset Purchase & Ijarah Agreement. Transfer of Asset ownership to customer without executing Sale Agreement or Gift deed at the end of lease term.
Islamic leasing Ijarah Finance Sharia Non-Compliance Risk under Ijarah Product Risk Mitigation: SOP/desktop check list, covering the Sharia compliant process must be in place for the respective departments/units Sharia Trainings must be provided to the staff Spreading Shariah Awareness amongst IFIs staff Regular Sharia Audit Review
Thank you for your Attention Sadaqat Khan, Senior Ex cutive VP Head of Sharia Advisory, Audit, Compliance & Ex cution AlHuda Centre of Islamic Banking & Economics (CIBE) Authored by Sadaqatullah Khan sadaqatg@hotmail.com It is Not allowed to copy or use the contents of this presentation without author's prior permission
