Fiqh al-Bay' bil-Thaman al-Ajil — Deferred Payment Sale in Islamic Law: The Contract Where the Price Is Paid in Installments Over Time (Unlike Cash Sale and Unlike Murabahah Which May Be Cash), the Dominant Islamic Mortgage Product in Malaysia (Bay' Bithaman Ajil — BBA), the Controversy Whether BBA Is Substantively Different From an Interest-Based Loan, and the Malaysian Courts' Rulings on BBA Disputes That Exposed Its Legal Ambiguities

Fiqh al-Bay' bil-Thaman al-Ajil (فِقهُ البَيعِ بِالثَّمَنِ الآجِل — Jurisprudence of the Deferred Payment Sale; *bay'*: from *b-y-'*: to sell; al-bay' = sale; *thaman*: price, value; *ajil*: deferred, postponed, future-dated; *al-bay' bil-thaman al-ajil* or *bay' bithaman ajil* [BBA] = sale at a deferred price; the basics: in a standard cash sale [bay' mu'ajjal], the price and delivery occur simultaneously; in a deferred payment sale, the buyer receives the good immediately but pays the price later — in a single deferred payment or in installments; this is permitted in Islamic law subject to conditions; the key rule: the price in a deferred sale may be higher than the cash price, provided: [1] the exact price is agreed at the time of contract [no ambiguity/gharar about how much will be owed]; [2] the deferred price increase is not characterized as interest [riba]; the classical basis: the classical schools permitted a higher price for deferred payment on the grounds that the seller is providing a real additional service [time value in the form of extended payment period] and bearing real additional risk [the buyer might not pay]; the price difference is a function of the sale agreement, not a separate lending arrangement with interest; the modern applications — Bay' Bithaman Ajil in Malaysia: BBA became the dominant Islamic mortgage product in Malaysia in the 1980s-2000s; structure: [1] the customer approaches the bank wanting to buy property; [2] the bank buys the property from the seller at cash price [say RM 500,000]; [3] the bank sells the property to the customer at a higher BBA price [say RM 1,200,000] to be paid in monthly installments over 20 years; [4] the customer thus pays RM 1,200,000 in total for a property the bank bought for RM 500,000; the controversy: critics argued that BBA was substantively identical to a conventional interest mortgage: [a] the 'profit' the bank earned [RM 700,000 in the example] was calculated using the same formulas as conventional mortgage interest; [b] the customer's monthly payments were calculated the same way as conventional loan repayments; [c] if the customer defaulted early, the bank demanded the full outstanding BBA price [not just the remaining principal], which meant the customer owed more than they would under a conventional loan — the opposite of what Islamic finance is supposed to achieve; [d] the BBA contract was a back-to-back arrangement: two sale contracts happened simultaneously, which in classical fiqh is prohibited as 'two sales in one' [bay'atan fi bay'a]; the Malaysian court cases: [1] Arab-Malaysian Finance Bhd v Taman Ihsan Jaya Sdn Bhd [2008]: the High Court held that BBA contracts where the bank claimed the full BBA selling price on default were unconscionable; the court recalculated the settlement amount more favorably to the customer; [2] subsequent cases raised similar issues; the BBA controversy contributed to the shift toward alternative structures [musharakah mutanaqisah — diminishing partnership] for Islamic home financing in Malaysia; the Shariah debate: [1] AAOIFI and many Gulf scholars were critical of BBA from the start — it lacked genuine ownership risk transfer to the bank; [2] Malaysia's own Shariah scholars debated extensively; the National Shariah Advisory Council of Bank Negara Malaysia eventually approved BBA but with modifications; [3] the BBA controversy became one of the most debated cases in Islamic finance — a test of whether form or substance determined Shariah compliance) is Islamic finance's most contested mortgage product.