Implementation Of Maqasid Shariah In Islamic House Financing: A Study Of The Rights And Responsibilities Of Contracting Parties In Bai Bithaman Ajil And Musharakah Mutanaqisah

Abstract

<span>The Maqasid-oriented approach in Islam demonstrates the Muslims commitment to uphold the authenticity of Islam as a religion and a complete way of life (ad-din). Maqasid Shariah is a transparent tool to outline and clarify the effective extent of the rights and responsibilities of the Mukallaf (servant of Allah) towards each other. Ignorance on Maqasid Shariah in Islamic business transactions, particularly for Islamic house financing led to misinterpretation, disruption, chaos, and trivial conflicts among the contracting parties. This paper discusses the implementation of Bai Bithaman Ajil (BBA) and Musharakah Mutanaqisah (MM) Home Financing instruments as practiced in Malaysia using the method of Imam al Shatibi. This paper concluded that a sound understanding of the knowledge, goals, and objectives of the Shariah at every level of a contract involving parties to a sale and purchase in Islamic Home Financing would enable improvement in practice through ijtihad (collective decision or general consensus). The Maqasid Shariah (the objective of Islamic Jurispudence) is adequate to provide the appropriate vehicle and procedure for the fulfillment of rights and responsibilities of contracting parties, thereby eliminating all sorts of financial criminology in trading and business (Kamali, 2002).</span>

Why Islamic Banks Are Reluctant to Offer Musharakah Mutanaqisah for Home Financing: The Case of Maybank Islamic and Affin Islamic Bank

“…The Bai' contract is concluded when the customer buys the bank's portion of the property as the monthly instalments which consist of partly the gradual purchase price of the bank's portion and partly the rental. As explained by Azli et al (2011), the modus operandi of MM is as follows:…”

“…MM was introduced as an initiative to replace the controversial BBA Home Financing. As explained by Azli et al (2011), MM is a better alternative contract for home financing and is well accepted by the Muslim scholars worldwide compared to BBA. Hassan (2011) added that MM can be operated in a Shariah compliant way because it shuns interest.…”

Issues Of Shariah In Islamic Loan In Malaysia: A Review

“…Debt-based financing usually adopted by Islamic banks in the form of murabahah, ijarah and istisna' (Ibrahim & Kamarudin, 2014) that based on profit sharing mode. However, in Islamic home financing, the dominant products https: //dx.doi.org/10.15405/epsbs.2018.12.03.90 Corresponding Author: Jasni Sulong Selection and peer-review under responsibility of the Organizing Committee of the conference eISSN: 2357-1330 886 used in sales and purchase transaction are Bai' Bithamin Ajil (deferred payment) and musharakah mutanaqisah (diminishing partnership) (Azli, Othman, Sahri, Aris, Arshad & Yaakob, 2011) that follow the interest debt-based financing (Othman, Majid & Rahman, 2015). The progress is regretted as the Islamic banks should adhere more on the safer products that agreed unanimously by Islamic jurists.…”

“…These elements can be seen in the application of bay' bithaman ajil (BBA), tawarruq and bay' 'inah contracts (Azli et.al., 2011). The contract of BBA for example, has involved gharar where the loan does not guarantee the lender in getting a complete house (Ahmad & Rahman., 2012;Azli et al, 2011).…”

“…Meanwhile a mafsadah/darar occurred when lender has to pay for loan even though the house is incomplete. If a developer has gone bankrupt and fail to complete a house, the liabilities is incurred by the customer as lender and not by bank which only become as financier (Ahmad & Rahman., 2012;Azli et al, 2011). The longer the mafsadah/darar took place, will involve an implication of oppression (ad'afan muda'afah).…”