A SHARI'AH PERSPECTIVE ON THE "LETTER OF OFFER" AS PRACTISED BY THE ISLAMIC FINANCIAL INSTITUTIONS: A COMPARATIVE STUDY WITH THE MALAYSIAN LAW OF CONTRACT

Abstract

Since 1983, Malaysia has implemented an Islamic banking system with the establishment of Bank Islam Malaysia Berhad side by side with the conventional banking system. To date, Malaysia has 6 local Islamic Banks, 3 foreign Islamic Banks and in 2004 the Islamic Banking assets in Malaysia amounted to RM89 billion, accounting for 9.9 per cent of total banking asset. Even though Malaysia has good experience in implementing Islamic banking and finance based on the foregoing facts, it is observed that not many practitioners, even bankers, are aware of the issue of the Shar'iah standing on the "Letter of Offer" as practised by the islamic financial institutions. Personnel involved in Islamic banking and finance might not be aware that there are dissimilarities in the Shari'ah and legal standing on the status of the Letter of Offer. It is very essential to discuss the exact Shari'ah standing on this issue because it is the determining factor to the validity of the transaction of the financing products. The writers intend to explore the Shari'ah view on the Letter of Offer and will make a comparative legal study with the Malaysian law of contract.