Islamic financing in the islamic mode of financing

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Islamic Financing In the Islamic mode of financing, the buyer has the right to return the car anytime during or at the end of the lease period. Since this is a lease agreement, and the lessee has been paying rentals, he can return the car to the bank and take back the security deposit any time he wishes.
1.3.4.7 Termination of Contract The buyer of the car has the option and right to terminate the contract and return the car before the contract reaches its maturity in both the conventional and Islamic mode of car financing. The difference lies in the post-termination phase. Conventional Financing In the conventional car financing scheme, if the customer wants to terminate the contract the only option he has is to buy the car by paying the rest of the instalments. Islamic Financing In the Islamic car financing scheme, the customer has two options: either return the car and get back the security deposit or buy the car from the bank at the market value plus a certain percentage of spread for the bank. 1.3.4.8 Documentation Differences Sequence/process Islam considers the procedure in which any transaction takes place as a significant factor in all modes of financing. The underlying difference between the Islamic and conventional modes of financing is that of the process. To Muslims, not only the end result but also the means to it are important. If the result is correct and the steps are wrong, or vice versa, the entire process is deemed invalid, from a Sharia’a perspective. According to Sharia’a principles, lawful steps to lawful results are very important. The most important financial difference between Islamic permitted leasing and conventional financial leasing is that the leasing agency must own the leased object for the duration of the lease. Ownership of the asset is the prerequisite for leasing out its usufruct. As mentioned, Islam places great emphasis on the sequencing. 1.3.5 The Meezan Bank Car Ijara Scheme Meezan Bank’s Car Ijara has been designed according to the principles of Islam and is completely interest-free. Moreover the Ijara contract and other documentation also comply with Sharia’a requirements. In contrast, a conventional car-financing scheme is actually an interest-based loan given by the financial institution with interest being charged on the loan. Also, in conventional car-leasing schemes, the lease contract is not in compliance with Sharia’a law and has riba and other un-Islamic elements in it.
1.3.5.1 What Makes Car Ijara Unique?

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