Introduction

HSBC Amanah is the international Islamic banking division of the HSBC group, responsible for the
development of Islamic banking products for distribution to clients of the HSBC Group. It was set up
in 1998 and has territorial offices in the UK, Saudi Arabia, the UAE, Malaysia, Indonesia, Bangladesh
and Brunei. At HSBC, they continuously strive to supply monetary solutions that meet the
requirements of their clients around the globe. HSBC Amanah provides Islamic banking solutions
which mix their financial expertise with the client endure values. Clients can experience the global
coverage and convenience of banking with HSBC without compromising the principles of the Shariah
(Islamic law). All the HSBC Amanah products and services are created in consultation with an
endorsed by the Islamic and Shariah researchers on HSBC Amanah‟s Shariah Committee. This
process of product development, fund segregation and Shariah review guarantees that HSBC
Amanah‟s Islamic products are free of interest and within the guidelines for commerce, finance and
investment that are prescribed by the Shariah.

According to the HSBC Amanah which regards to charging for any late charge is, they cost an
administration fee for any late or partial payments however this cannot be charged to cover the
opportunity cost. It can be charged in order to encourage financial duty and to cover administrative
expenses. This charging is not an interest, and does not related with interest rate. If the fee charged is
higher than their actual expenses incurred, HSBC Amanah will donate the extra money to a public
charity of its choice under the guidance from their Shariah Supervisory Committee. How is ijarah
financing distinctive from the conventional lending? Isn’t it simply relabeling interest as profit? Ijarah
can be defined as a contract “to transfer the usufruct of a particular property to another man or woman
in exchange for a lease claimed from him.” In different words, the term Ijarah is comparable to a
conventional leasing mode of financing.

The client pay rent for the use of property, instead of paying interest on the amount of loan. Bank
buys the property either from seller, or the client in the case of refinance. And then rent it to the client
over an agreed term. The distinguishing feature of this mode is that the assets remain the property of
HSBC Amanah. Over the term of the finance, will be the landlord and customer assumes the role of
tenant. It mentioned in the contract for Lease Asset To Remain Bank‟s Property clause : “Nothing in
this offer letter and the Leasing-I Contract shall confer in the Customer any right or property or
interest in or to the rent asset which shall remain the Bank’s property and the Customer shall have no
right or interest therein in any other case than as a bailee” During this period, client makes monthly
payments which consist of a contribution towards the purchase rate of the property (capital) and rental
payments.
Features

The eligibility to apply Leasing-I Line or Ijarah is:

 Must be aged between 21 and 60 years old

 Must have monthly salary is RM3,000 or above
 Must be a Malaysian or have Malaysian PR status

To apply in HSBC Amanah Leasing-I Line Account, the applicant’s must declare the following:

 Not an undischarged bankrupt

 Not insolvent
 Have no bankruptcy proceedings pending
 Will not utilise any part of the facility amount towards purchase of property to be financed/
charged to the HSBC Bank.
 No Event of Default has occurred or is continuing

The bank does not require the customer to use the facility for any specific purpose but the customer
must not use it for a purpose against the principles of Shariah.

An HSBC Amanah agreed to provide financing facility to lease an asset to the customer. The facility
specified the period, schedule of lease payments and a rental rate for the lease. The customer can
decide on the type of asset which the HSBC Amanah will agree and lease using the above facility.
Although a leasing facility has been approved, the lease agreement should specify the type of asset as
well as the appropriate rental rate.

In this case, pre-determined rental rates should be indicative for the different types of assets as the
HSBC Amanah will assume the relevant risk exposures for each type of asset. The lease agreement is
then executed between the customer and the HSBC Amanah only when the purpose of the leased
asset, type of leased asset, lease payment schedules, rental rate, lease period as well as whether the
asset is to be transferred to the lessee at the end of the lease tenor or otherwise, have been determined.
Concept/ modes/ financing tools of that product

The Islamic financing tools of HSBC Amanah Leasing-I Line is is Ijarah. Linguistically, Ijarah comes
from Arabic root word ajara, means “to rent out”, “lease out”. Some say the original word is the noun
ujrah, meaning “a rental payment”. Technically, it is defined as an exchange contract for transfer of
benefit or usufruct in return for compensation. Ijarah is a binding contract and, therefore, it cannot be
terminated unilaterally. However, it can be legally terminated if an option to annual is stipulated at the
time of the contract or in case of legal excuses.

The definition mention by HSBC Amanah, Ijarah is letting on lease and sale of definite usufruct of
any asset in exchange of definite reward. It refers to a contract of land or other asset leased at a fixed
rent payable in cash and also to a mode of financing adopted by Islamic banks. The arrangement is
under the Islamic banks lease equipment, buildings or other facilities to a client, against an agreed
rental. The lessee generally also has an option to purchase the leased asset.

Nowadays Ijarah is a broad used concept that majority jurists unanimous in the acceptance as one of
the Islamic financial instrument as oppose to other instruments such as Bai Bithamanil Ajil (BBA)
and the controversial Bai’ Eenah. The concept of ijarah itself is a rent with acquisition where the
Islamic bank purchases the property at first and become the owner of the property, then the bank lease
it out to the customer at an agreed monthly price. A portion of each monthly payment goes towards
ownership, until the customer owns 100%.

Owning a house is everyone’s dream due to the prominence of its function as one of the basic needs
of human life. Various ways have been done to meet this necessity by building their own, purchasing
or renting from others. However, the increase of the house price is something unavoidable by the
time. From this argument, HSBC Amanah as Islamic financing institutions offers a solution to
overcome these problems by proposing a way of house leasing based on Shariah compliant. The
Leasing-I Line is Islamic financial instrument which created by HSBC Amanah under Ijarah (lease).

HSBC Amanah is the global financing institutions that provide Islamic financial services which
broadly established in many countries. The presence of HSBC Amanah is to offer the comprehensive
financial products that corresponding to the requirement of Shariah. One of its achievements is to
receive a reward as the best international Islamic bank by Euromoney magazine in 2010, as one of the
prestigious Islamic finance event which held annually. The study will addressee in the case of
Malaysia. The detail information stated in the agreement such as compensation for late payment or
loss of and damage to lease asset will be observed to ensure that no party harmed or no element of
fraud in the transaction involved.
References

1. HSBC Amanah Malaysia Berhad 2019, Financing – HSBC MY Amanah, viewed 17 December
2019, https://www.hsbcamanah.com.my/financing/

2. Mufti Muhammad Taqi Usmani 2019, An Introduction to Islamic Finance, Jamia Darul-Uloom
Karachi Korangi Industrial Area, Pakistan