Fatwa No : 81902
Ruling on Leasing a Car through Meezan Bank

Ruling on Leasing a Car through Meezan Bank

What do the Islamic scholars say regarding the following issue: I am involved in the car trading business. Many customers come to our showroom intending to purchase vehicles through leasing. However, due to the element of interest (riba), they try to avoid such transactions. Recently, Meezan Bank has emerged as an option, and it is being said that their system is interest-free. However, apparently, their procedures seem identical to those of conventional leasing companies. For example: Insurance, Penalty on late payments, And other apparent aspects that the Shariah does not permit or that resemble interest-based transactions. Because of the Shariah Board’s approval, we consider working with Meezan Bank, but some of our partners raise objections and express doubts, asking: “What is the difference between this and other leasing companies? We kindly request a satisfying and comprehensive reply, especially regarding the following:1.The issue of insurance; 2.The penalty—even if used for charitable purposes, it is still a fine, which resembles interest; 3.What is the difference between Meezan Bank and conventional leasing companies? 4.Is it permissible for us to engage in business with Meezan Bank?

الجوابُ حامِدا ًو مُصلیِّا ً

Respected Questioner! The fundamental difference between leasing through Meezan Bank and through any other leasing company is that Meezan Bank's management consults its Shariah Board and qualified scholars in business matters and then strives to align its operations with Islamic principles. In contrast, other institutions do not follow this approach. Furthermore, Meezan Bank essentially provides the vehicle on Ijarah (leasing), and the procedure it follows is undoubtedly Shariah-compliant and correct. There is no Islamic objection to it. However, in order to discourage unnecessary delays in installment payments, the lessee is required to donate a specific amount to a charitable fund as Sadaqah or contribution, which is not considered a penalty in Shariah. This practice has been adopted out of necessity and there is explicit allowance for it in the Maliki school of thought, as stated by Imam Malik (رحمه الله). As for vehicle insurance, although it is not permissible in principle, it is considered the personal arrangement of the bank, and the lessee has no role or interference in this matter. Therefore, due to it being solely the bank’s action, the lessee will not be held accountable or sinful. In conclusion, there is no Shariah objection to leasing a vehicle through Meezan Bank, and it is undoubtedly permissible.