DoesMusharakah Mutanaqisahconverge withBai Bithamin Ajiland conventional loans?

Abstract

Purpose This study aims to examine the disputableShari’ahand the technical issues underlying the implementation of theMusharakah Mutanaqisahpartnership (MMP) model in home financing by Islamic banks in Malaysia. It assesses whether this much-lauded facility is in line withShari’ahrules and whether it diverges from or converges to the Bay’ Bithaman Ajil (BBA) and conventional loan models. Design/methodology/approach This study uses a qualitative methodology based on in-depth interviews to achieve these objectives. Findings With regard to the issue of convergence, it is obvious from the interviewees’ perceptions that the MMP model is converging with the BBA and conventional housing loans. Originality/value Many factors were mentioned as the reasons for this convergence, with the most important being that Islamic banks are not operating in a fully fledged Islamic financial system, reducing the risk weightage and regulatory restrictions. As forShari’ahcompliance, controversy may result from the enhanced features that structure this facility. Though these enhanced features areShari’ahcompliant, it transforms the MMP model into a debt rather than a partnership contract.

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