By Sami Zaptia.
London, 27 June 2020:
Libya’s state and largest bank, Jumhouria bank, announced last week that it is now offering Islamic (Murabaha) car loans to its customers to buy Hyundai cars.
The bank had also announced Islamic loans for light pick-up vans/trucks, furniture, durable goods, household appliances, and computers.
Its Hyundai Islamic ‘‘hire purchase’’ car offer entails monthly payments for eight years for cars ranging from LD 55,000 to LD 66,000. These require monthly payments ranging from LD 538 to LD 697.
The maximum financing for furniture is LD 40,000, and for durable, electrical and household goods, the maximum funding is LD 20,000. Payment terms are over a 72-month period. These are done through what the bank calls “Islamic Murabaha” or “Order to Buy” schemes.
It will be recalled that the bank had launched its Islamic Murabaha loan/purchase schemes last year.
The Bank’s Assistant General Manager for Islamic Banking had been quoted as saying “Murabaha is targeting individuals and companies, and the bank is diversifying into the market to meet the needs of customers”.
He had pointed out that the expansion of Islamic Murabaha products came in response to the growing demand from customers for these products, which have been introduced previously in (only) some branches.
The Bank had begun to implement Islamic Murabaha with a financing ceiling of LD 85,000 including the profit margin, and it is worth mentioning that the products of the Islamic Murabaha are provided in accordance with the legal regulations approved by the country’s Shariah Supervisory Authority.
What Is Murabaha Islamic banking?
It will be recalled that the term Murabaha in Islamic banking refers to what is also referred to as ‘‘cost-plus financing’’, in Islamic financing structures. This is where the seller, in this case Jumhouria bank, provides the cost and profit margin of an asset.
Murabaha is not an interest-bearing loan (qardh ribawi) but is an acceptable form of credit sale under Islamic law. As with a rent-to-own arrangement, for example, the purchaser does not become the true owner until the loan is fully paid.