Developing a Hawalah Model for Islamic Car Financing Settlement

As revealed by Malaysia’s bankruptcy statistics between 2019 until May 2023 , around 11.05% of bankruptcy in Malaysia is due to default of vehicle loan. This has led to the tightening up of vehicle loan underwriting and increased vehicle loan rejection rates. This paper attempts to solve this problem by proposing an Islamic contract transfer of debt; al-Hawalah as an alternative to reduce the number of defaulters in Islamic car financing. This study is an exploratory research using content analysis from the secondary data by observing on two aspects: car financing insolvency data and the Hawalah contract. In fiqh muamalat, ḥawālah refers to the transfer of financial liability from one debtor to another that would free the initial debtor from any debt (Kureshi and Hayat, 2014). This study is expected to come out with a Hawalah model for car financing settlement in Islamic bank.