A) Nina is planning to buy a car. She goes to Toyota branch nearby to do survey on the price. However, she found that the car is too expensive. So, she finally decided to rent a car of her best friend, Nora with a monthly payment of RM300 per month. They make an agreement before a lawyer. Based on this case:

 

 a. Analyse the financing facilities that suits to the above situation. (6 marks) 

b. Elaborate the essential elements in the business contract carried out by both parties. (9 marks)

 c. Discuss the responsibilities of the parties involved in this contract. (6 marks) 

d. Discuss how the contract between Nina and Nora can be terminated and discharged. (6 marks)

 e. Assuming that Nina approaches an Islamic Financial Institutions and applies for leasing of a car for a period of three years. The cost of financing the car is RM 40,000. Nina is willing to pay the lease in monthly installments with the profit rate is 4.5%. Compute the total leasing rentals of this financial transaction. (3 marks)

 B. The existence of Islamic banks is to develop, foster and promote the use of Islamic principles, laws and traditions in all banking transactions, financial, business and other related areas. Explain the differences of the main goals of Islamic banking with conventional banking. (6 marks)

 C. Based on your opinion, explain the challenges for Islamic banks in Malaysia in attracting non-Muslim customers (9 marks)

Question A:

a. A deferred payment plan is a type of financing facility that is best suited to the situation at hand. A deferred payment plan is a flexible payment option or agreement between a lender and a borrower in which the borrower delays payment until a later date. And because Nina is Nora's best friend and they both agreed before a lawyer in their negotiations, this is where the arrangement comes into play. This arrangement is frequently made when the borrower is unable to pay immediately but the lender is willing to make exceptions. The borrower can keep using whatever they borrowed, but they may have to start paying interest on it. 

b. The contract must include an offer, consideration, and acceptance. 

• Offer. It must be clear and concise, and it must provide something of value from one party to the other.
• Consideration. It is a legal terms refers to when one party gives something in exchange for something from the other party. In the case, one party exchange goods or services for monetary payment.
• Acceptance. Both parties must accept the contract, demonstrating that they reached an agreement on the transaction's issues. 

c. Responsibilities of the parties involved.

1. Nina
   • Payment. In the contract, one party, the borrower, is usually legally obligated to make specific payment in exchange for a specific amount of goods or services. The contract may include payment obligations such as payment amount and payment deadline. 
2. Nora
   • Delivery. The lessor is obligated to deliver the car. the contract may be specify the delivery date, method and other terms.
   •  Quality of goods. A contract may also include terms requiring the lessor to provide a car of a certain quality. This type of obligation may differ depends on the specific of contracts. 
   • Seeking legal assistance. Contract can differ greatly from one claim to the next. in this case, Nora may seek the advised of a qualified and experience contracts lawyer if she is involved in the dispute or has a legal question regarding a contract obligation. a contract attorney can provide sound and legal advise to help you better understand contract obligation. 
3. Both parties (Nina and Nora)
   • General obligations. Aside from specific obligations, each contracting party must follow the general principles of contract formation.
   • Transferring obligation of contracts. The ability to delegate contractual obligations is determined by contract laws in your state, the type of obligations being delegated, and other factors. Only the party who agreed to enter into the contract is authorized to carry out the obligations.

d. Nina and Nora's contract can be terminated by mutual agreement. If both parties to a contract mutually agree to discharge or end the contract based on their agreement on the date when the contract is to be discharged, then the original contract is discharge due to a mutual agreement. According to the scenario, Nina rented a car to Nora for RM 300 per month. A contract is documented. Assume that Nina decides to buy her own car or she is unable to pay her monthly payment and asks Nora to discharge the contract. Nora agrees and they sign an agreement to that effect. Due to mutual consent, this discharges the original contract. 

e. Nina's total leasing rentals is RM 41,802.2

Question B: The differences of Islamic banking with conventional banking

• Conventional banking
  • Operates based on Country's banking laws and financial practices.
  • Maximizes profit without any restriction.
  • Profit of pre-determined rate of interest.
  • Not based on Profit and Loss sharing.
  • "riba" is illegal for Muslims.
• Islamic banking
  • Operates based on Shariah, the Islamic principles.
  • Maximizes profit subject to Shariah, the Islamic principle.
  • Profit based on agreed profit sharing ratio. 
  • Based on profit and loss sharing
  • "halal" for Muslims.

Question C: Perspective about the difficulties that Malaysian Islamic banks face in attracting non-Muslim customers

•  Islamic banking is facing challenges to make appropriate rules and regulations to cope up with the present demands for their customers. 
• Strong regulatory challenge in the cross border activities including financial engineering, some sorts of Shariah issues and lack of proper institutional framework. Cost and competitiveness of cross-jurisdictions, lack of equal field for Islamic and Conventional banking, risk management and diversification.

Step-by-step explanation

• A facility is a formal financial assistance program provided by a lending institution to assist a business in need of operating capital. Overdraft services, deferred payment plans, lines of credit, revolving credit, term loans, letters of credit, and swingline loans are examples of facilities. 
• A contract is a legal document that is signed by two or more parties. A contract must contain several essential elements in order to be legally binding. An offer, acceptance, and consideration must all be included in the contract. A contract creates certain obligations on one or all parties involved. The discharge of a contract happens when these obligations come to an end. Contract obligation is the responsibility that contract parties must bear when entering into legally binding agreements.
• Islamic banking, or shariah-compliant finance, refers to financial activities that adhere to Islamic law. Two fundamental principles of Islamic banking are the sharing of profit and loss, and the prohibition of the collection and payment of interest by lenders and investors.

e.  [(Bank's Total finance/ No. of instalments) + ((Bank's Total Finance - (Bank's Total finance/ Total No. of instalments) X (Current Month- 1)) *(Rental Rate))].

( RM 40,000/36) + (RM 40,000-(RM 40,000/36) x (36-1) x  (4.5%)

(RM 1,111)+(RM 40,000-(RM 1,111) x 35 (4.5%)

(RM 1,111)+RM 40,000-RM 38,885 (4.5%)

RM 1,111+RM 1,115 (4.5%)

RM 1,111+RM 50.2

Monthly rent for 36 months= RM 1,161.2

RM 1,161.2 x 36= RM 41,802.2

Hence Nina's total leasing rentals is RM 41,802.2