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Gulf Africa in Shariah auto finance plan

NAIROBI, Kenya, Mar 23 – Gulf African Bank has launched a Shar\’iah compliant Auto Finance plan that will enable potential customers own cars under the Ijarah or leasing option.

The bank (lessor) and the customer (lessee) will jointly purchase the car at a predetermined ratio for instance 70-30. The lessee will then assume ownership of the car and pay the bank rent for a predetermined period.

At the end of the period, the customer has the option of getting a new vehicle under a new agreement or purchase the car for an amount not more than the value of his/her deposit. 

"Ijarah contracts are treated as operating expenses and are therefore fully tax deductible making this a very attractive option for corporates "said Gulf African Bank CEO Najmul Hassan at the launch of the product.

"We will assume all costs pertaining to car ownership including registration fees, Takaful (Insurance) and anti theft device installation costs."

Ijarah is a form of borrowing intended to finance specific assets (plant and machinery, vehicles, or office equipment). The ownership remains with the lessor. The lessee is given only usage rights. Ijarah finance is intended for long-term borrowing requirements between three and seven years.

"What makes this package particularly attractive is that rent is consideration for usage of the asset, no rent is therefore charged when the vehicle is not in use, damaged or in the garage for repair.  Under conventional financing, the bank takes instalments even when the vehicle is not being used," concluded Mr Najmul.

The lessee may be asked to undertake that if he fails to pay rent on its due date, he will pay a certain amount to a charity, which will be administered through the Bank.

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For this purpose the bank maintains a charity fund where such amounts are credited and disbursed for charitable purposes under supervision of the Shar\’iah Supervisory Board.

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