Bai Bithaman Ajil (BBA), (Deferred Payment Sale)

Definition

• It refers to the manner of payment – deferred payment sale. Also known as Bai Muajjal or Bai Taqsit.
• Technically, it is a sale of commodity on deferred payment basis whether on the basis of lump sum or instalments. It applies to both musawamah and murabahah sales.

Modus Operandi

• Customer identifies the asset to be acquired, and purchase the asset by signing the S&P Agreement with the Vendor.
• The Bank then purchases the asset from Customer at RM90,000 (Bank's Purchase Price)
• Bank subsequently sells back the asset to the Customer at RM90,000 plus profit margin of RM30,000 (Bank's Selling Price = RM120,000)
• The customer pays the RM120,000 by instalments based on the agreed period

Checklist 

Essential Elements 

• Buyer
• Seller
• Object of Contract / Merchandise
• Price
• Contract of Offer and Acceptance (Aqad)

Necessary Conditions 

Buyer & Seller

• Capable of accepting responsibilities
• Of sound mind.
• Attains the age of puberty* (matured).
• Intelligent.
• Not restricted from dealing in business transactions

-Not a bankrupt.

-Not a "safih" (an extremely extravagant person)

• Not being forced to enter into a contract    

Object of Contract / Merchandise

• Must be in existence at the time of sale.
• The seller must own the object of sale and it is in his/her possession when the transaction takes place.
• The object of sale must be a property of value and of pure substance (halal).
• The delivery of the object of sale must be certain and is not by chance.
• The object of sale is known to the seller and buyer.

Price

• The price must be made known to the buyer and the type of currency is specified.
• The price must be determined and agreed by both parties.
• A deferred payment sale is allowable provided that:

-The tenor or period of payment is specified.

-The tenor would be effective from the date the object/merchandise is delivered to the buyer.

      Contract of Offer and Acceptance (Aqad) 

• In definite and decisive language.
• Acceptance must be consistent with the offer made by the seller.
• Offer and acceptance must be made at the one and the same meeting.

Application

• Financing a customer to purchase commodities:- houses, shop houses, land, motor vehicles, consumer goods, shares, education packages and other asset-based financing activities.
• Refinancing of assets for the purpose of redemption, construction, renovation, project financing, bridging facilities, end-financing, contract financing etc.
• BBA Securitisation.

Sources: Sources:  Islamic Banking Handbook, First Edition April 2010, Institut Bank-Bank Malaysia,pp. 61-62.