The Implication of Musharakah Mutanaqisah in Malaysian Islamic Banking Arena: A Perspective on Legal Documentation

Subky, Khairul Hafidzi Mohd; Liu, Jing Yuan; Abdullah, Muhammad Muzzammil; Mokhtar, Zhafri Farhan; Faizrakhman, Ainaz

doi:10.18646/2056.41.17-003

Cited by 23 publications

(32 citation statements)

References 7 publications

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“…However, why would the timing of transferring legal ownership be a matter of significance? First, as there may probably be certain risks associated with either owning an asset or the lack of ownership (Mostafa et al, 2016;Subky et al, 2017) a mushāraka mutanāqisa may represent a mechanism to mitigate those risks associated with either owning an asset in full or the lack of ownership (Nor et al, 2017). It seems through an initial (joint) partial ownership, an Islamic bank may be able to mitigate those risks to avoid the risks involved as a result of full ownership or lack of ownership.…”

Section: Deliberation On Literaturementioning

confidence: 99%

Musharaka Mutanaqisa as Islamic Banking Practices in Bahrain: An Empirical Enquiry

Alkhan

2020

Asian Economic and Financial Review

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One of the modes of Islamic financing includes a mushāraka (partnership) mode. Mushāraka mutanāqisa (diminishing partnership) is considered to be one of the forms of mushāraka. As the purpose and end result of this product seems to be considerably similar to that of other Islamic financial products, this research empirically analyzes whether, when, and why Islamic banks may opt for a mushāraka mutanāqisa. Although the Kingdom of Bahrain may arguably be considered as one of the global Islamic financial hubs, there seems to be limited empirical researches investigating the practice of mushāraka mutanāqisa by using the Kingdom of Bahrain as a case study. By using a qualitative methodology, this research empirically investigates the practice of mushāraka mutanāqisa by four Islamic banks (consisting of two for each Islamic retail and Islamic wholesale banks). The results suggest that perhaps due to various reasons and risks involved, the utilization of mushāraka mutanāqisa may relatively be noticeably lower than other Islamic financing products. Additionally, there seems to be no indications that the utilization of mushāraka mutanāqisa may increase in the near future. This research may have contributed to knowledge by adding to literature contemporary empirical data pertaining to the practice of mushāraka mutanāqisa in the Islamic banking industry in the Kingdom of Bahrain. Contribution/ Originality: This research may be one of the few contemporary studies that use the Kingdom of Bahrain as a case study to empirically analyze the practice of mushāraka mutanāqisa in the Islamic banking industry.

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Section: Deliberation On Literaturementioning

confidence: 99%

Musharaka Mutanaqisa as Islamic Banking Practices in Bahrain: An Empirical Enquiry

Alkhan

2020

Asian Economic and Financial Review

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“…Unlike a conventional mortgage, MM relies on rental rates rather than interest rates for the rate of return (Kashi and Mohamad, 2017). Subky et al (2017) reported that the use of rental rates in MM is subject to many variables such as different local rental rates and market fluctuations. However, MM has also been criticised by scholars due to its unfair ownership transfer rate (Kashi and Mohamad, 2017) and dependence on using benchmarks set by the conventional banks (Wei and Thaker, 2017).…”

Section: Musharakah Mutanaqisah (Mm)mentioning

confidence: 99%

“…Contracts in Malaysia are governed by common law and the Contracts Act 1950; the parties to the contract should ensure that all essential terms are clearly defined and included in the contract, namely liability clauses and contract termination.The legal documentation used for Islamic home financing is not standardised; more specifically, not only do the terms and conditions for each product differ from one bank to another (Yusoff and Oseni, 2019), but the list of legal documents also varies(Subky et al, 2017). Such noticeable variations may result from different views in the Shariah Committee of each bank, in addition to the financial need to offer competitive financial products to attract customers (Yusoff and Oseni, 2019).…”

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confidence: 99%

“…For example, a full-fledged Islamic bank has considerably more documentation than other Islamic Financial Institutions (IFIs) for its MM contract (Asian Institute of Finance, 2013). This bundle of mandatory documents adds additional documentation fees to the homebuyer's costs(Subky et al, 2017) and potentially leads to contractual inconsistencies if not properly cross-referenced (Yusoff and Oseni, 2019).…”

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confidence: 99%

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The Applicability of Ijarah Al-Mawsufah Fi Al-Dhimmah in Malaysia

Dieng¹

2019

IJMAR

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Purchasing a house under construction is definitely a risky investment for both homebuyer and financier. An Ijarah mawsufah fi al-dhimmah (forward lease) is a method of leasing where the lessor accepts rent prior to the delivery of an asset or property. The rental paid is refunded if the asset is not delivered. This paper aims to examine the legality of forward lease and its applicability in Malaysia. Based on a review of scholarly papers and secondary data collected from company websites, this paper concludes that the benefits of using Ijarah mawsufah fi al-dhimmah are not fully exercised and more efforts need to be done in order to benefit all key stakeholders.

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“…These countries are still dominated by Murabahah Financing as MM is considered more complicated in its system and its calculation technique (Akram, Rafique & Alam, 2011;M. Ridwan & Shahruddin, 2013;Maulin, 2017;Rohmi, 2015;Subky et al, 2017). Thus, the issues that will be addressed in this paper are common in Islamic Finance industry across the globe.…”

Section: Introductionmentioning

confidence: 99%

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

Zaaba¹,

Hassan²

2019

TUJISE

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This paper focuses on the challenges faced by the Malaysian Islamic Banks in implementing Musharakah Mutanaqisah (MM) Home Financing. Even though the study is specifically on the Malaysian Islamic banks, but the issues and recommendations addressed in this study are also pertinent to other Islamic banks across the world since they are also offering it. Drawing upon in-depth semi-structured interviews with the senior officers in two leading Islamic banks in Malaysia, one is the bank which terminated its MM Home Financing products however the other one continues to offer it. Knowing the contradicting perspectives of both banks gives insight of the real challenges faced by them in offering MM for home financing which are advance rental and the system's incapability to capture the unique nature of MM, and at the same time to know the motivation of offering it i.e. product diversification and comprehensive risk mitigation. This paper concludes by making recommendations that may be adopted by Islamic banks and the regulators to facilitate the promotion of MM Home Financing. Notably, this paper offers empirical findings which are different from the previous literature.

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The Implication of Musharakah Mutanaqisah in Malaysian Islamic Banking Arena: A Perspective on Legal Documentation

Abstract: Abstract:This paper observes the implication of Musharakah

Cited by 23 publications

References 7 publications

Musharaka Mutanaqisa as Islamic Banking Practices in Bahrain: An Empirical Enquiry

Musharaka Mutanaqisa as Islamic Banking Practices in Bahrain: An Empirical Enquiry

The Applicability of Ijarah Al-Mawsufah Fi Al-Dhimmah in Malaysia

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

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