Does Musharakah Mutanaqisah converge with Bai Bithamin Ajil and conventional loans?

Aghilasse Kashi (Department of Finance, Kulliyyah of Economics and Management Sciences, International Islamic University Malaysia, Kuala Lumpur, Malaysia)
Azhar Mohamad (Department of Finance, Kulliyyah of Economics and Management Sciences, International Islamic University Malaysia, Kuala Lumpur, Malaysia)

International Journal of Law and Management

ISSN: 1754-243X

Publication date: 11 September 2017

Abstract

Purpose

This study aims to examine the disputable Shari’ah and the technical issues underlying the implementation of the Musharakah Mutanaqisah partnership (MMP) model in home financing by Islamic banks in Malaysia. It assesses whether this much-lauded facility is in line with Shari’ah rules and whether it diverges from or converges to the Bay’ Bithaman Ajil (BBA) and conventional loan models.

Design/methodology/approach

This study uses a qualitative methodology based on in-depth interviews to achieve these objectives.

Findings

With regard to the issue of convergence, it is obvious from the interviewees’ perceptions that the MMP model is converging with the BBA and conventional housing loans.

Originality/value

Many factors were mentioned as the reasons for this convergence, with the most important being that Islamic banks are not operating in a fully fledged Islamic financial system, reducing the risk weightage and regulatory restrictions. As for Shari’ah compliance, controversy may result from the enhanced features that structure this facility. Though these enhanced features are Shari’ah compliant, it transforms the MMP model into a debt rather than a partnership contract.

Keywords

Citation

Kashi, A. and Mohamad, A. (2017), "Does Musharakah Mutanaqisah converge with Bai Bithamin Ajil and conventional loans?", International Journal of Law and Management, Vol. 59 No. 5, pp. 740-755. https://doi.org/10.1108/IJLMA-04-2016-0044

Download as .RIS

Publisher

:

Emerald Publishing Limited

Copyright © 2017, Emerald Publishing Limited

Please note you might not have access to this content

You may be able to access this content by login via Shibboleth, Open Athens or with your Emerald account.
If you would like to contact us about accessing this content, click the button and fill out the form.
To rent this content from Deepdyve, please click the button.