Islamic Hire-Purchase (IHP) also known as Al-Ijarah Thumma Al-Bai’ (AITAB) is a widely used method of vehicle financing in Malaysia and serves as a Shariah compliant-alternative to interest-based conventional hire-purchase. However, the absence of specific legislation governing IHP creates challenges in the practice of IHP in Malaysia. As part of the development of Islamic banking regulations, Bank Negara Malaysia (BNM) has issued the Policy Document on Ijarah (Ijarah PD) as a Shariah standard that govern the practice of all Ijarah-based products in Islamic banking institutions in Malaysia, including IHP. However, questions remain as to whether the Ijarah PD is sufficient to address the unique features of IHP transactions. Therefore, this study aims to examine the role of the Ijarah PD in governing the practice of IHP in Malaysia. The study employs a qualitative research methodology using the doctrinal method. Data were obtained through library research by analyzing the BNM Ijarah PD and other secondary sources including books, journals, reports and online publications. The collected data were then analyzed using content analysis. The study finds that the Ijarah PD plays a significant role in governing the practice of IHP in Malaysia by strengthening legal enforceability, enhancing Shariah compliance and promoting ethical business conduct among Islamic financial institutions. Nonetheless, certain areas could benefit from further clarification, particularly regarding standard documentation, disclosure timing, risk allocation and repossession procedures. The findings highlight the need for a more comprehensive and harmonized regulatory framework. This study provides insights for policymakers and practitioners on areas where regulatory improvements may be necessary in the governance of IHP transactions.
Abdullah, D.V., & Chee, K. (2010). Islamic Finance: Understanding its Principles and Practices: Marshall Cavendish International Asia Pte Ltd.
Abdullah, N. I., & Dusuki, A. W. (2006). Customer's Perception of Islamic Hire Purchase (AITAB) in Malaysian Financial Institutions: Empirical Evidence. IIUM Journal of Economics and Management, 14(2), 177-204.
Abdullah, N. I. (2009). Implementation of Muamalah Hire-Purchase Bill in Malaysia: Chasing a Mirage? IIUM Law Journal, 17(1).
Abdul?Razak, L., & Saupi, M.?N. (2017). The Concept and Application of Dam?n al?Milkiyyah (ownership risk): Islamic law of Contract Perspective. ISRA International Journal of Islamic Finance, 9(2), 148–163.
Abu Bakar, N.?M., Yasin, N.?M., & Ng, S. T. (2020). Unfair Contract Terms in Malaysian Islamic Banks: Empowering Bank Consumers by Islamic Education Ethics. Humanities & Social Sciences Reviews, 8(2), 13–24.
Accounting & Auditing Organization for Islamic Financial Institutions (2015). Shari’ah Standard No. 9: Ijarah and Ijarah Muntahia Bittamleek (SS-9). Manama: AAOIFI.
Ahmed, H., & Ibrahim, I.?R. (2018). Financial consumer protection regime in Malaysia: Assessment of the legal and regulatory framework. Journal of Consumer Policy, 41(2), 159–175.
ASEAN Committee on Consumer Protection (2023, January). ASEAN Guidelines on Consumer Impact Assessment (CIA). ASEAN Consumer Protection Cooperation.
Awang, M. D., & Asutay, M. (2017). Maqasid al-Shariah perspectives on the Implementation of the Hire-Purchase Act 1967 in Malaysia with reference to al-Ijarah thumma al-Bai' Financing Contract. Malaysian Journal of Consumer and Family Economics, 20(Special 2) 36-56.
Ayub, M. (2007). Understanding Islamic Finance. John?Wiley & Sons.
Bank Negara Malaysia (2010). Shariah Resolutions in Islamic Finance (2nd ed.). Kuala Lumpur: Bank Negara Malaysia.
Bank Negara Malaysia (2018). Policy Document on Ijarah https://www.bnm.gov.my/documents/20124/938039/PD+Ijarah+28062018_Final.pdf/479fc345-c628-8996-25f0-8d1fe06aa700?t=1592245815724
El?Din, S. I., & Abdullah, N. I. (2007). Issues of implementing Islamic hire purchase in dual banking systems: Malaysia's experience. Thunderbird International Business Review, 49(2), 225-249.
Hassan, R., Yusoff, A., & Muneeza, A. (2012). Legal Stains in the Malaysian Islamic Banking Practices of Al Ijarah Thumma Al Bai’(AITAB). World Business Institute, 2(1), 95-100.
Jalil, M. A. (2013). Islamic Hire Purchase Law is Getting Special Attention in Malaysia: A Socio-Legal Analysis. Journal of Sociological Research, 4(2), Pages 28-50.
Kamali, M.H. (2007). A Shari’ah analysis of issues in Islamic leasing. Journal of King Abdulaziz University: Islamic Economics, 20(1), 3–22.
Lahsasna, A. (2014). Shari’ah Non-Compliance Risk Management and Legal Documentations in Islamic Finance: John Wiley & Sons.
Muhammad Zin, H., Salamon, H., & Abdullah, N. I. (2016). Pemindahan Hak Milik Dalam Instrumen Al Ijarah Thumma Al Bay’ (AITAB) di Malaysia. Sains Humanika, 8(3–2), 39–46.
Shiyuti, H. A., Khairat, D., Mourtada, M. A., & Ghani, M. A. (2012). Critical Evaluation on Al-Ijarah Thummalbai'. Paper presented at the Asian Finance Association (AsFA) 2013 Conference, 3 August 2012.
Yusoff, R., Kamdari, N. A., & Masri, D. N. (2013). Selection Factors of The Acceptance al-Ijarah Thumma al-Bay (AITAB) in Shah Alam. Paper Proceeding of the 5th Islamic Economics System Conference. Faculty of Economics and Muamalat, Universiti Sains Islam Malaysia, Kuala Lumpur, Malaysia.
Zakaria, M. U., & Ab Ghani, A. M. (2015). Pembiayaan Kenderaan Berkonsepkan Al-Ijarah Thumma Al-Bay' (AITAB) di Bank Muamalat Malaysia Berhad dan Isu-Isu Berkaitan. Jurnal Syariah, 23(3), 435–476.
Zin, H. M., Muktar, S. N., & Ahmad, F. (2025). Bank Negara Malaysia Policy Document on Ijarah and its Role in Governing the Practice of Islamic Hire-Purchase in Malaysia. International Journal of Academic Research in Business and Social Sciences, 15(11), 1165–1173.
Copyright: © 2025 The Author(s)
Published by Knowledge Words Publications (www.kwpublications.com)
This article is published under the Creative Commons Attribution (CC BY 4.0) license. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this license may be seen at: http://creativecommons.org/licences/by/4.0/legalcode
