A comparative analysis of the Hire Purchase Act 1967 and the Al- Ijarah Thumma Al Bay’ (AITAB) transactions / Mohamad Suffian Ja’afar and Najwa Noordin

Islamic Banking is fast growing business in Malaysia since inception in 1983. Al-Ijarah Thumma al-Bay’ (AITAB) for vehicle financing has become one of its main products. However, there is no specific law to address and govern the Al-Ijarah Thumma al-Bay’ transactions in Malaysia. Currently issue pertaining to Al-Ijarah Thumma al-Bay’ is being referred to Hire Purchase Act 1967 (Act 212) as the governing framework. However, the Hire Purchase Act 1967, though were amended few times, was enacted to cater for conventional transaction thus certain conflict pertaining to shariah issues were not accounted for inside the Act. The newly introduced Islamic Financial Services Act 2013 is a regulatory and procedural law in nature and do not act as specific law for Al-Ijarah Thumma al-Bay’. This study suggests that a separated procedural and substantive law should be gazette for Al-Ijarah Thumma al-Bay’. This is due to the fact the current Hire Purchase Act 1967 is not fully Shariah compliant. There should be a separate Act is enacted and is urgently required for the industry. The Act should be handy in clarifying and addressing certain weaknesses, ambiguity and unclear interpretation in the question of law in the current Hire Purchase Act 1967. Alternatively, the current Hire Purchase Act 1967 is amended by inserting certain provision as to make it in accordance with Shariah requirement of the Al-Ijarah Thumma al-Bay’.