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MUSYARAKAH MUTANAQISAH AS AN ALTERNATIVE TO BBA INHOME FINANCING
Musharakah Mutanaqisah Partnership (MMP)
BBA as Home Financing
Different between BBA and MM
Challenges in Implementing Musyarakah Mutanaqisah
MMP based on diminishing partnership concept.
MMP consists of three contracts which are musharakah, ijarah as well as bay’
, the customer enters into a musharakah under the concept of ‘Shirkat-al-Milk’ (joint ownership) agreement with the bank to co-own the asset being financed
the bank leases its share in the asset ownership to the customer under the concept of ijarah.
A sale contract which provides the buyer the benefit of a deferred payment
The price is deferred and BBA can also be categorized as a credit sale and if the payment is made by installments.
This concept has been widely used in Asia country for example Malaysia, Indonesia and Brunei
Case of Arab Malaysian Finance Berhad vs Taman Ihsan Jaya (2008)
The BBA in house financing, is regarded as a loan transaction and not a sale and purchase transaction
BBA prescribed that if the borrower defaulted on the loan, the defaulting borrower is to repay to the bank the whole total of the sale price
BBA was held not only contain the riba’ element, its nature and operation were also deemed inequitable and unjust to purchasers/borrowers
BBA Modus Operandi and Illustration
Customers must pay the home installments or purchased despite the home has been neglected by the developer
BBA give higher cost compared to the conventional
Impact of BBA to customers
Musyarakah Mutanaqisah Operates
MM is based on partnership and leasing contract where both Mushakarah partners assume the risks of property acquisition.
MM is accepted internationally
Easy restructuring / rescheduling process, need not be tied to the bank sale price
Advantages of MM
Customers own the asset 100% upon full redemption under MM financing
How Islamic banks can utilize Musharakah Mutanaqisah based financing contract to cater the low income customers.
To educate the representation of Islamic banks on the true objectives of Islamic banks
To promote Musharakah Mutanaqisah
Islamic banks are bound to Bank Negara Malaysia’s regulations
To conclude, Islamic finance has continued to expand in the more challenging and competitive international financial environment.
The products that they are offering now have been improved from time to time.
With the cooperation among government, regulators, bankers,
Shariah scholars as well as customers, this product has lots of potential and more Shariah complaint compared to previous financing product, which is Bai’ Bithaman Ajil.
AZLINDA BINTI HARUN - 2011149521
HAJAR BINTI AHMEDY - 2011157475