Islamic Loan, An Introduction
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Nowadays most banks and financial institutions offer to a Homeowner loans, a choice of either a conventional loan or Islamic financing. What is the different between this two ? , the simple answer is that both are the same, except in a conventional loan, the purchaser will pay interest, and in Islamic financing, the purchaser will pay a profit.
A common home Islamic financing facility is offered under the Shariah principle of Al-Bai Baithaman Ajil (BBA). In BBA financing, a bank’s customer buys a property from the vendor under an agreement of sale. The bank then, at the request of the customer and with the consent of the vendor, steps in to become a party to the sale agreement by executing a novation agreement between them, making the bank now the purchaser of the property. The bank’s purchase price is described as the loan facility amount.
