Islamic banks, since the inception of the Islamic financial system (IFS), have been offering – in several jurisdictions– various Shariah-compliant financial products by adapting and reshaping classical products. One such example is Hire Purchase under Shirkah al-Milk (HPSM), which is a modified variant of conventional hire purchase. In its conventional form, hire purchase serves as two contracts: ijarah (leasing) and sale. However, HPSM combines three distinct contracts: shirkah (partnership), ijarah (leasing), and sale. The ownership of the subject matter in the HPSM contract is transferred from the lessor to the lessee through a gift (hibah) contract, token amount, gradual sale, or a specific amount. To implement this investment mode, banks provide equipment or goods on a rental basis, with the condition that ownership will be transferred to the lessee at the end of the contract. This synthesis of contracts is allowed as a financing and asset acquisition means in accordance with Islamic principles. To represent the execution of HPSM within the Islamic financial system (IFI), this article adopts a descriptive approach as part of the qualitative research method. The study draws upon secondary data from various sources, including library resources, product manuals, and online databases. By leveraging these sources, the article aims to provide an appraisal of HPSM in the context of the IFI.

Keywords: HPSM, Hire Purchase, Shariah, Musharakah, Ijarah, Sale.