Home Financing through the Musharakah Mutanaqisah Contracts: Some Practical Issues

Meera and Abdul Razak (2005) compared the al-Bay’ Bithaman Ajil (BBA) and the Musharakah Mutanaqisah Partnership (MMP) contracts. The BBA, a murabahah contract, was argued to be problematic and even unIslamic for long-duration contracts. The MMP contract which is a combination of musharakah (partne...

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Main Authors:	Abdul Razak, Dzuljastri, Mydin Meera, Ahamed Kameel
Format:	Conference or Workshop Item
Language:	English
Published:	2007
Subjects:	HG Finance
Online Access:	http://irep.iium.edu.my/9723/ http://irep.iium.edu.my/9723/1/MMP_Some_Practical_issues_.doc_-_final.pdf

id	iium-9723
recordtype	eprints
spelling	iium-97232011-12-14T21:20:38Z http://irep.iium.edu.my/9723/ Home Financing through the Musharakah Mutanaqisah Contracts: Some Practical Issues Abdul Razak, Dzuljastri Mydin Meera, Ahamed Kameel HG Finance Meera and Abdul Razak (2005) compared the al-Bay’ Bithaman Ajil (BBA) and the Musharakah Mutanaqisah Partnership (MMP) contracts. The BBA, a murabahah contract, was argued to be problematic and even unIslamic for long-duration contracts. The MMP contract which is a combination of musharakah (partnership) and ijarah (rental) contracts was argued to be a more appealing alternative. In the MMP, the equity of the financier diminishes progressively while, in accordance, the equity of the customer grows. Unlike for the BBA contract, scholars are consensus on the Shari’ah permissibility of the MMP contract. A mathematical derivation for the MMP showed that the formula for the MMP to be similar to the formula used in conventional loans but nonetheless with the interest rate replaced with the rental rate. Therefore, one major advantage of MMP was argued to be that it can avoid interest (riba) totally. Also, unlike under the BBA, the balance of financing, at any point in time, never exceeds the original price of the asset. Nevertheless, some practical issues need to be addressed particularly the means of estimating the rental rate, tax issues, defaults and asset value appreciation. This paper discusses these issues. When not profitable for the banks when rentals rates fall short of interest rates, the MMP can be implemented through cooperatives, which can be also an investment avenue for members. 2007-09-03 Conference or Workshop Item PeerReviewed application/pdf en http://irep.iium.edu.my/9723/1/MMP_Some_Practical_issues_.doc_-_final.pdf Abdul Razak, Dzuljastri and Mydin Meera, Ahamed Kameel (2007) Home Financing through the Musharakah Mutanaqisah Contracts: Some Practical Issues. In: 5th International Islamic Banking Conference Islamic Finance , 3-4 Sept, 2007, Ritz Carlton, Kuala Lumpur. (Unpublished)
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 Mydin Meera, Ahamed Kameel Home Financing through the Musharakah Mutanaqisah Contracts: Some Practical Issues
description	Meera and Abdul Razak (2005) compared the al-Bay’ Bithaman Ajil (BBA) and the Musharakah Mutanaqisah Partnership (MMP) contracts. The BBA, a murabahah contract, was argued to be problematic and even unIslamic for long-duration contracts. The MMP contract which is a combination of musharakah (partnership) and ijarah (rental) contracts was argued to be a more appealing alternative. In the MMP, the equity of the financier diminishes progressively while, in accordance, the equity of the customer grows. Unlike for the BBA contract, scholars are consensus on the Shari’ah permissibility of the MMP contract. A mathematical derivation for the MMP showed that the formula for the MMP to be similar to the formula used in conventional loans but nonetheless with the interest rate replaced with the rental rate. Therefore, one major advantage of MMP was argued to be that it can avoid interest (riba) totally. Also, unlike under the BBA, the balance of financing, at any point in time, never exceeds the original price of the asset. Nevertheless, some practical issues need to be addressed particularly the means of estimating the rental rate, tax issues, defaults and asset value appreciation. This paper discusses these issues. When not profitable for the banks when rentals rates fall short of interest rates, the MMP can be implemented through cooperatives, which can be also an investment avenue for members.
format	Conference or Workshop Item
author	Abdul Razak, Dzuljastri Mydin Meera, Ahamed Kameel
author_facet	Abdul Razak, Dzuljastri Mydin Meera, Ahamed Kameel
author_sort	Abdul Razak, Dzuljastri
title	Home Financing through the Musharakah Mutanaqisah Contracts: Some Practical Issues
title_short	Home Financing through the Musharakah Mutanaqisah Contracts: Some Practical Issues
title_full	Home Financing through the Musharakah Mutanaqisah Contracts: Some Practical Issues
title_fullStr	Home Financing through the Musharakah Mutanaqisah Contracts: Some Practical Issues
title_full_unstemmed	Home Financing through the Musharakah Mutanaqisah Contracts: Some Practical Issues
title_sort	home financing through the musharakah mutanaqisah contracts: some practical issues
publishDate	2007
url	http://irep.iium.edu.my/9723/ http://irep.iium.edu.my/9723/1/MMP_Some_Practical_issues_.doc_-_final.pdf
first_indexed	2023-09-18T20:19:20Z
last_indexed	2023-09-18T20:19:20Z
_version_	1777408000871366656

Home Financing through the Musharakah Mutanaqisah Contracts: Some Practical Issues

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