Projection pricing for musyarakah mutanaqisah home financing with the use of rental yield as the reference benchmark pricing

The Islamic financial institution offers home financing products which are fully compliant with the Shariah. However, these Islamic financial products are in the absence of a reference benchmark pricing which is free from the interest rate. There is a call for introducing a reference benchmark prici...

Full description

Bibliographic Details
Main Authors:	Redzuan, Nur Harena, Kassim, Salina
Format:	Conference or Workshop Item
Language:	English English
Published:	2017
Subjects:	HG3368 Islamic Banking and Finance
Online Access:	http://irep.iium.edu.my/69552/ http://irep.iium.edu.my/69552/ http://irep.iium.edu.my/69552/1/69552%20-%20projection%20pricing%20for%20musyarakah.pdf http://irep.iium.edu.my/69552/2/69552-programme.pdf

id	iium-69552
recordtype	eprints
spelling	iium-695522019-02-12T03:06:41Z http://irep.iium.edu.my/69552/ Projection pricing for musyarakah mutanaqisah home financing with the use of rental yield as the reference benchmark pricing Redzuan, Nur Harena Kassim, Salina HG3368 Islamic Banking and Finance The Islamic financial institution offers home financing products which are fully compliant with the Shariah. However, these Islamic financial products are in the absence of a reference benchmark pricing which is free from the interest rate. There is a call for introducing a reference benchmark pricing an alternative to interest-based borrowing and free from any of riba element. Usmani (2008) stressed that even though using an interest-based benchmark pricing is allowed and the practice is highly discouraged. He further argued that the practice of reference benchmarking pricing against interest rate does not advance the basic philosophy of promoting Islamic economy, whereby it makes no impact on the distribution system. The main objective of this study is to assess the projection of the pricing for musyarakah mutanaqisah home financing. The projection pricing is performed with the viability of adopting the rental yield as a reference benchmark pricing, which is the alternative to relying on the market interest rate. The forecasting technique of the Artificial Neural Network (ANN) model is adopted to assess the predictability of the rental yield of the housing market for a period of 20 years. Subsequently, the forecast data is used to project the pricing of musharakah mutanaqisah home financing product using simulation method. The projection pricing of musharakah mutanaqisah is compared with the bai bithaman ajil (debt-based financing) and the conventional home financing. Based on simulation exercise, there is a significant difference between total payment by the customer for these two products. The Islamic financial institution can consider relying on the rental yield as the reference benchmark pricing to price the home financing product. 2017 Conference or Workshop Item PeerReviewed application/pdf en http://irep.iium.edu.my/69552/1/69552%20-%20projection%20pricing%20for%20musyarakah.pdf application/pdf en http://irep.iium.edu.my/69552/2/69552-programme.pdf Redzuan, Nur Harena and Kassim, Salina (2017) Projection pricing for musyarakah mutanaqisah home financing with the use of rental yield as the reference benchmark pricing. In: The 5th International Accounting and Business Conference 2017 (IABC 2017), Institute of Leadership and Development, Nilai, Negeri Sembilan. (Unpublished) https://iabc.uitm.edu.my/2017
repository_type	Digital Repository
institution_category	Local University
institution	International Islamic University Malaysia
building	IIUM Repository
collection	Online Access
language	English English
topic	HG3368 Islamic Banking and Finance
spellingShingle	HG3368 Islamic Banking and Finance Redzuan, Nur Harena Kassim, Salina Projection pricing for musyarakah mutanaqisah home financing with the use of rental yield as the reference benchmark pricing
description	The Islamic financial institution offers home financing products which are fully compliant with the Shariah. However, these Islamic financial products are in the absence of a reference benchmark pricing which is free from the interest rate. There is a call for introducing a reference benchmark pricing an alternative to interest-based borrowing and free from any of riba element. Usmani (2008) stressed that even though using an interest-based benchmark pricing is allowed and the practice is highly discouraged. He further argued that the practice of reference benchmarking pricing against interest rate does not advance the basic philosophy of promoting Islamic economy, whereby it makes no impact on the distribution system. The main objective of this study is to assess the projection of the pricing for musyarakah mutanaqisah home financing. The projection pricing is performed with the viability of adopting the rental yield as a reference benchmark pricing, which is the alternative to relying on the market interest rate. The forecasting technique of the Artificial Neural Network (ANN) model is adopted to assess the predictability of the rental yield of the housing market for a period of 20 years. Subsequently, the forecast data is used to project the pricing of musharakah mutanaqisah home financing product using simulation method. The projection pricing of musharakah mutanaqisah is compared with the bai bithaman ajil (debt-based financing) and the conventional home financing. Based on simulation exercise, there is a significant difference between total payment by the customer for these two products. The Islamic financial institution can consider relying on the rental yield as the reference benchmark pricing to price the home financing product.
format	Conference or Workshop Item
author	Redzuan, Nur Harena Kassim, Salina
author_facet	Redzuan, Nur Harena Kassim, Salina
author_sort	Redzuan, Nur Harena
title	Projection pricing for musyarakah mutanaqisah home financing with the use of rental yield as the reference benchmark pricing
title_short	Projection pricing for musyarakah mutanaqisah home financing with the use of rental yield as the reference benchmark pricing
title_full	Projection pricing for musyarakah mutanaqisah home financing with the use of rental yield as the reference benchmark pricing
title_fullStr	Projection pricing for musyarakah mutanaqisah home financing with the use of rental yield as the reference benchmark pricing
title_full_unstemmed	Projection pricing for musyarakah mutanaqisah home financing with the use of rental yield as the reference benchmark pricing
title_sort	projection pricing for musyarakah mutanaqisah home financing with the use of rental yield as the reference benchmark pricing
publishDate	2017
url	http://irep.iium.edu.my/69552/ http://irep.iium.edu.my/69552/ http://irep.iium.edu.my/69552/1/69552%20-%20projection%20pricing%20for%20musyarakah.pdf http://irep.iium.edu.my/69552/2/69552-programme.pdf
first_indexed	2023-09-18T21:38:44Z
last_indexed	2023-09-18T21:38:44Z
_version_	1777412996396482560

Projection pricing for musyarakah mutanaqisah home financing with the use of rental yield as the reference benchmark pricing

Similar Items