Stormy times ahead for Islamic banking
By Rafe Hanef - PART I
High Court judge Justice Datuk Abdul Wahab Patail’s judgment in Arab-Malaysian Finance Berhad vs Taman Ihsan Jaya Sdn Bhd & 2 Ors and 12 other cases has caught the attention of local Islamic finance players in Malaysia. The judgment dealt a blow to a concept much utilised by local Islamic bankers. In this first of a two-part series, Rafe Haneef, a former Islamic banker, shares his thoughts on the ruling.
The nascent Islamic banking industry appears to be yet again facing a storm. In a recent High Court judgement, Justice Datuk Abdul Wahab Patail has declared the ubiquitous Bai Bithaman Ajil (BBA) contracts as null and void and that the customers have to pay only the principal amount to the banks. It has undoubtedly created a lot of apprehension and confusion in the marketplace and the Islamic banks are scurrying to obtain legal opinions to get clarity on their BBA portfolios. This note is an attempt to briefly highlight the key elements of the judgement that relates only to the interpretation and application of the Shariah.
(The Malaysian Reserve, Oct 20, 2008, Page 30)
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