Academic journal article Journal of Sociological Research

Islamic Hire Purchase Law Is Getting Special Attention in Malaysia: A Socio-Legal Analysis

Academic journal article Journal of Sociological Research

Islamic Hire Purchase Law Is Getting Special Attention in Malaysia: A Socio-Legal Analysis

Article excerpt


The Muamalah Hire Purchase Bill (MHPB) was initially prepared by a group of members of the shariah supervisory council of Bank Islam Malaysia Berhad (BIMB) in 1991 and it was later submitted to the Ministry of Domestic Trade and Consumer Affairs in Malaysia and the Central Bank of Malaysia for review. Finally in the year 2000, it was referred to the Attorney General's Chamber for further examination whether it met the shariah rules and how it could be implemented in Malaysia. However, the Bill could still not be submitted to the Parliament until today for consideration and approval due to certain reasons. The objective of this paper is to discuss the nature of the Islamic hire purchase contract (IHPC) and to compare it with the traditional hire purchase contract (THPC) for purposes to find the difference between the two systems of law. Descriptive and analytical research methodology had been applied in this research paper to analyze the collected data.

Keywords: Traditional hire purchase contract (THPC), Hire Purchase Act (HPA), Muamalah Hire Purchase Bill (MHPB), Al-ijarah thumma al-bai (AITAB), Islamic hire purchase law (IHPL) etc.


There is the Hire Purchase Act 1967 (Malaysia) (herein after referred to as HPA 1967) which deals with the hire purchase agreement in Malaysia. The Act is made based on the English higher purchase law. The provisions of the Act are fair to the hirer. It provides a fair treatment to the hirer of goods under a hire purchase agreement (Abdullah & Razali, 2008). However, there are some provisions in the HPA that are not in conformity with the shariah (Islamic law) principles. Abdullah (2009) has argued that the HPA 1967 is not fully suitable for the Muslims in Malaysia and accordingly, therefore, she proposes for a separate Islamic hire purchase law which can be named as Muamalah Hire Purchase Bill (herein after referred to as MHPB). As mentioned in the abstract, such a Bill has in fact been prepared by some Muslim scholars in Malaysia. Nevertheless, some Islamic scholars find that although this Bill provides many provisions which are in line with the shariah principles but still it has some legal shortfalls.1

The Hire Purchase Act 1967 Malaysia (HPA 1967) has some provisions which are contrary to the Islamic contract law principles, for example, the HPA 1967 has a provision to take interest in a hire purchase contract made under the Act. Taking interest is strictly prohibited in the Islamic law. As Malaysia being a Muslim majority country, thus, the Muslims think that the existing HPA 1967 can only be used by the non-Muslims in conducting any hire purchase contract. However, the act is not applicable by the Muslims as it does not fully conform to the Islamic law principle as mentioned above, as a result of which the Malaysian Muslims decide that it is now the appropriate time that an Islamic Hire Purchase Act should be enacted for the Muslims in Malaysia. Some Muslim scholars in Malaysia say the proposed Act can be named as the Islamic Hire Purchase Act (IHPA) or the Muamalah Hire Purchase Act (MHPA). Muamalah is an Arabic term which means 'a transaction made based on the Islamic law principles'.

It is to be noted that the HPA 1967 (Malaysia) is not fully contradictory with the Islamic law principles as only certain sections are in contradiction with the Islamic contract law principles. Hence, some people may argue that as the HPA 1967 is 90 percent in line with the shariah (Islamic law) principles, the rest can be amended to fully conform to the shariah principles. However, this issue is compounded by the fact that Malaysia being a multi-national and multi-religious country, the existing HPA 1967 is only suitable for the non-Muslims, in which case the amendment proposal to the act is not carried out, as the best solution would be to enact a separate Islamic higher purchase law for the Muslims in Malaysia.

In this paper, we have discussed the basic features of the traditional hire purchase law and the Islamic hire purchase law. …

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