Islamic Finance
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Ijara and insurance on new car
Question
Asalamualaikum brother,
I read on your previous response regarding ijara that you consider it as a suitable alternative that we currently have in Mauritius.
I have tried to search who has certified that the product/structure is actually sharia compliant in practice and not only by name, but could not find any. Can you please confirm if you have been able to review this.
Secondly, my concern is on the insurance of the car. Based on my knowledge, it is the lessor’s (Rogers in this case) responsibility for the insurance of the car, but i don’t think they actually pay for the insurance and it is left at the expense of the lessee. Since they are the owner of the car until the contract ends, they may request that a full comprehensive insurance cover is taken instead of the minimum third party cover we should be opting for.
Please advise on this and what should we do in this instance. I believe that if they impose full comprehensive insurance cover, then the ijara contract is not shariah compliant. I do not see any takaful for car so far.
I read on your previous response regarding ijara that you consider it as a suitable alternative that we currently have in Mauritius.
I have tried to search who has certified that the product/structure is actually sharia compliant in practice and not only by name, but could not find any. Can you please confirm if you have been able to review this.
Secondly, my concern is on the insurance of the car. Based on my knowledge, it is the lessor’s (Rogers in this case) responsibility for the insurance of the car, but i don’t think they actually pay for the insurance and it is left at the expense of the lessee. Since they are the owner of the car until the contract ends, they may request that a full comprehensive insurance cover is taken instead of the minimum third party cover we should be opting for.
Please advise on this and what should we do in this instance. I believe that if they impose full comprehensive insurance cover, then the ijara contract is not shariah compliant. I do not see any takaful for car so far.
Answer
All praise be to Allah, peace and Blessings upon Prophet Muhammad.
Wassalaamou Aleykum Warahmat-Ullah
Regarding the issuance of a Shari‘ah Compliance Certificate, I am not currently in a position to issue an official certificate to Rogers Finance, as I have not received any formal request to do so.
Wassalaamou Aleykum Warahmat-Ullah
Regarding the issuance of a Shari‘ah Compliance Certificate, I am not currently in a position to issue an official certificate to Rogers Finance, as I have not received any formal request to do so.
However, through my own initiative, I arranged an informal meeting with Mr Tawfiq Udhin, who was directly involved in the development of Rogers Finance’s Ijarah product. Together with an accountant colleague, I reviewed the relevant documentation and discussed our questions with him.
Based on the documents examined and the explanations provided, our assessment was that the Ijarah product could be regarded as Shari‘ah-compliant, or at least acceptable within the Mauritian context. In reaching this assessment, we took into consideration the local legal and regulatory environment, in which Shari‘ah does not constitute the governing legal framework. This was an informal assessment and does not constitute official Shari‘ah certification.
Concerning your second question about responsibility for insurance, I would respectfully clarify that, according to the information provided during our review, the insurance cost is borne by the lessor. The understanding that it is borne by the lessee is therefore incorrect. Different arrangements may be used to implement this responsibility.
For a detailed explanation of these arrangements or any other aspect of Rogers Finance’s Ijarah product, please contact Mr Tawfiq Udhin directly. As someone involved in the product’s development, he is better placed to provide the relevant operational and contractual clarifications.
I trust that this response addresses both of your questions.
May Allah guide and protect us all.
Dr Hussein B. Peerbaye
for Department of Islamic Research
for Department of Islamic Research