Application of musharakah mutanaqisah home financing as an alternative to traditional debt financing : lessons learned from the U.S. 2007 sub-prime crisis

One of the causes of the 2007 U.S. sub-prime crisis in 2007 is the use of traditional debt financing whereby the bank does not take risk of owning the property. Furthermore, the bank does not share its profit with customer and monthly instalment is pegged against market interest rate. This paper wil...

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Main Authors:	Abdul Razak, Dzuljastri, Amin, Hanudin
Format:	Conference or Workshop Item
Language:	English
Published:	2012
Subjects:	HG Finance
Online Access:	http://irep.iium.edu.my/25888/ http://irep.iium.edu.my/25888/ http://irep.iium.edu.my/25888/1/%28C-9_%29_Paper_ID_-_MFAC_2012__FM-8_-_Assoc._Prof._Dr._Dzuljastri_Abdul_Razak.pdf

id	iium-25888
recordtype	eprints
spelling	iium-258882012-12-18T04:55:12Z http://irep.iium.edu.my/25888/ Application of musharakah mutanaqisah home financing as an alternative to traditional debt financing : lessons learned from the U.S. 2007 sub-prime crisis Abdul Razak, Dzuljastri Amin, Hanudin HG Finance One of the causes of the 2007 U.S. sub-prime crisis in 2007 is the use of traditional debt financing whereby the bank does not take risk of owning the property. Furthermore, the bank does not share its profit with customer and monthly instalment is pegged against market interest rate. This paper will initially examine salient issues (e.g. interest charges, indebtedness) faced by customers and banks during the crisis. Secondly, it will propose an alternative model known as musharakah mutanaqisah or diminishing partnership whereby the bank jointly own the property with customer and real rental rates replaces interest rate as a benchmark to the determine monthly instalment. In studying the rental rates, the hedonic pricing theory is discussed. It is argued that the musharakah mutanaqisah concept can address issues of the crisis through the application of the Shariah principles and necessary changes to the regulatory framework. Keywords: Islamic bank; Musharakah mutanaqisah; Rental index; Global financial crisis; Equity financing. 2012 Conference or Workshop Item PeerReviewed application/pdf en http://irep.iium.edu.my/25888/1/%28C-9_%29_Paper_ID_-_MFAC_2012__FM-8_-_Assoc._Prof._Dr._Dzuljastri_Abdul_Razak.pdf Abdul Razak, Dzuljastri and Amin, Hanudin (2012) Application of musharakah mutanaqisah home financing as an alternative to traditional debt financing : lessons learned from the U.S. 2007 sub-prime crisis. In: 14th Malaysian Finance Association Conference 2012, ‘Emerging Markets and Financial Resilience : Decoupling Growth from Turbulence , 1-3 June, 2012, , Parkroyal, Penang Resort, Penang, Malaysia. (Unpublished) http://www.mfa.com.my/conference.html
repository_type	Digital Repository
institution_category	Local University
institution	International Islamic University Malaysia
building	IIUM Repository
collection	Online Access
language	English
topic	HG Finance
spellingShingle	HG Finance Abdul Razak, Dzuljastri Amin, Hanudin Application of musharakah mutanaqisah home financing as an alternative to traditional debt financing : lessons learned from the U.S. 2007 sub-prime crisis
description	One of the causes of the 2007 U.S. sub-prime crisis in 2007 is the use of traditional debt financing whereby the bank does not take risk of owning the property. Furthermore, the bank does not share its profit with customer and monthly instalment is pegged against market interest rate. This paper will initially examine salient issues (e.g. interest charges, indebtedness) faced by customers and banks during the crisis. Secondly, it will propose an alternative model known as musharakah mutanaqisah or diminishing partnership whereby the bank jointly own the property with customer and real rental rates replaces interest rate as a benchmark to the determine monthly instalment. In studying the rental rates, the hedonic pricing theory is discussed. It is argued that the musharakah mutanaqisah concept can address issues of the crisis through the application of the Shariah principles and necessary changes to the regulatory framework. Keywords: Islamic bank; Musharakah mutanaqisah; Rental index; Global financial crisis; Equity financing.
format	Conference or Workshop Item
author	Abdul Razak, Dzuljastri Amin, Hanudin
author_facet	Abdul Razak, Dzuljastri Amin, Hanudin
author_sort	Abdul Razak, Dzuljastri
title	Application of musharakah mutanaqisah home financing as an alternative to traditional debt financing : lessons learned from the U.S. 2007 sub-prime crisis
title_short	Application of musharakah mutanaqisah home financing as an alternative to traditional debt financing : lessons learned from the U.S. 2007 sub-prime crisis
title_full	Application of musharakah mutanaqisah home financing as an alternative to traditional debt financing : lessons learned from the U.S. 2007 sub-prime crisis
title_fullStr	Application of musharakah mutanaqisah home financing as an alternative to traditional debt financing : lessons learned from the U.S. 2007 sub-prime crisis
title_full_unstemmed	Application of musharakah mutanaqisah home financing as an alternative to traditional debt financing : lessons learned from the U.S. 2007 sub-prime crisis
title_sort	application of musharakah mutanaqisah home financing as an alternative to traditional debt financing : lessons learned from the u.s. 2007 sub-prime crisis
publishDate	2012
url	http://irep.iium.edu.my/25888/ http://irep.iium.edu.my/25888/ http://irep.iium.edu.my/25888/1/%28C-9_%29_Paper_ID_-_MFAC_2012__FM-8_-_Assoc._Prof._Dr._Dzuljastri_Abdul_Razak.pdf
first_indexed	2023-09-18T20:38:35Z
last_indexed	2023-09-18T20:38:35Z
_version_	1777409212505128960

Application of musharakah mutanaqisah home financing as an alternative to traditional debt financing : lessons learned from the U.S. 2007 sub-prime crisis

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