Thanks to Ijarah Finance’s halal car finance in Australia, Muslim business owners can access the vehicles they need for work opportunities. However, there is one critical exception—cars destined for ride-sharing services.
Drivers wanting to purchase cars for services such as Uber, Ola, DiDi, and GoCatch are not eligible for finance. Our brief guide explores why.
The Nature Of The Asset’s Use
One of the fundamental principles behind financial structures like Ijarah is that the asset—in this case, a car— is used in ways that align with Sharia principles. Yet when it comes to ride-sharing, there are a few potential concerns.
One issue is the uncertainty regarding how the driver will use the car. In Islamic finance, we prefer clear transactions with predictable terms using assets. Ride-sharing is somewhat unpredictable, as the driver transports different passengers, which can increase wear and tear or exposure to accidents.
There is also the potential for haram activities. A ride-share driver often has no control over whom they transport and what they carry. This means drivers could transport passengers who are engaging in forbidden activities such as alcohol consumption or other morally questionable behaviour.
Ownership And Financial Risk
Under the Ijarah Thuma Albai principle, the financier retains ownership of the vehicle until the customer buys it out through a rent-to-own model.
However, renting an asset for a business that generates varying income may expose the financier to excessive risk. Additionally, the way ride-sharing drivers use the car could lead to higher depreciation and a potential loss in its value, since ride-share cars accumulate high mileage quickly. This reduces their value faster than standard business vehicles.
The Risk Of Riba
Using certain ride-share companies could expose drivers to pricing that resembles riba, like surge pricing and commission-based revenue models. These can include elements of gharar, or disguised forms of interest, in their contracts with the drivers.
Contracts of this type might also constitute financial arrangements that Islamic scholars consider questionable, which is why we choose to avoid involvement altogether.
Avoiding Maisir
In Islamic finance, Sharia law prohibits excessive speculation, otherwise known as maisir. When you use a car for ride-share services, it can involve uncertain income streams for you as the borrower, which makes it risky for the financier.
Therefore, if you cannot meet the rental payments due to fluctuations in your earnings, it can result in financial hardships, which contradicts the ethical approach of Islamic finance.
While Ijarah Finance does not provide solutions for ride-sharing cars, we can assist halal car finance in Australia for other business vehicles. If you hold an ABN and are registered for GST, contact us today to learn more about our Ijarah products or apply now on our website.