Al bay’ bithaman ajil
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BBA is a contract where goods are delivered immediately but payment is deferred to a future date. It involves the prompt delivery of goods to the buyer while postponing payment until a later specified date or through installments. Hadith provide evidence that deferred payment contracts were permitted by the Prophet Muhammad, including instances where he engaged in such contracts and where the payment terms included profit for the seller in addition to the price. For BBA contracts, there must be an offer (sighah), an asset or goods, and an agreed upon price between the buyer and seller. BBA is commonly used in Malaysia for medium to long-term financing of goods like property, vehicles, education costs, and other assets.
Al bay’ bithaman ajil
- 2. DEFINITION Literally : Deferred payment sale. Technically: Sale contract in which the payment of the price is deferred and payable at a certain particular time in the future. A contract whereby the commodity is delivered immediately and the price is paid by installment. The selling price includes a profit margin agreed by both parties and the profit is not an interest payment, however it is part of the sell price.
- 3. NATURE OF BBA BBA is essentially to sell something with a prompt delivery of sold items to the purchaser while the payment is postponed until a specified date in the future or through installment (taqsit). Can be implicated for other sale contracts including bay’ Musawamah and bay’ al-Murabahah. (not applicable for salam contract). In the Malaysian context the selling price both in bay’ al-Murabahah and BBA is based on the cost price. However Murabahah is used for short-term transactions while BBA is used for longer-term transactions.
- 4. EVIDENCE In general, no issue arises from the practice of deferring the payment of sale price. In a Hadith by a companion, Jabir : that the Prophet (s.a.w) bought a camel from him outside the city of Madinah whereby the payment was settled later on in Madinah. In another Hadith narrated by Aisha r.a : that the Prophet (s.a.w) bought a meal from one Yahudi with deferred payment, and he mortgaged his iron shirt made from iron.
- 5. PILLARS OF BBA Seller Buyer Sighah Asset/ Goods Price
- 8. TIME VALUE OF MONEY IN BBA Hadith did not specifically mention whether such increment is allowed on the basis of its deferment. According to majority jurists: increasing the price due to the deferment in the payment is permissible because the increase is against the commodity and not against the money. It’s permissibility is based on legal proof nass and by the testimony of the jurists by consensus.
- 9. APPLICATION In Malaysia, BBA financing is employed by bank to provide medium to long-term financing to clients for acquiring e.g. Property, land, motor vehicles, consumer goods, shares, overdraft facility, education financing package etc. Home financing is the most popular facility granted under the concept Bai Bithaman Ajil (BBA) either to purchase existing completed houses, build or construct new house on customer’s land even as a refinancing facilitiy. In BBA, the customer sells the property purchased to the bank for a cash sum paid to the customer and the property will then be immediately resold back by the bank to the customer at higher price which include the bank’s profit on the sale, payable by the customer to the bank by monthly installments over a fixed period of time.
- 10. CLIENTS INTEND TO ACQUIRE THE FOLLOWING ITEM: Houses / Shop houses Land Motor vehicle Consumer goods Shares Overdraft facility Education financing package Personal financing Other suitable and acceptable goods