Background of Study
Bank approved of home loan
Operation issue of BBA home financing
Objective of study
How Musharakah Mutanqisah (MM) better compared to Bai’ Bithaman Ajil (BBA)
Implement MM concepts for home financing
ISLAMIC HOME FINANCING : MUSYARAKAH MUTANAQISAH AND AL-BAY' BI-THAMAN AJILl
al-Bay` Bi-thaman Ajil (BBA)
Debt type financing.
Based on the diminishing partnership concept which consist of two portion:
1) financing where the customer is a partnership agreement
2) The Ijarah involving the lease of the property.
Recognized predominantly in Malaysia, Indonesia, and Brunei.
The MM is the return of the rental property that can be reviewed at any time.
The bank then leases the house under Ijarah.
Using sampling methods of surveys which focuses on 150 postgraduate students of UNIMAS and UiTM
Choose students because according to Singhapakdi et. al. (1996), students are considered a legal sample for exploratory study
And questionnaires has been hand out to these particular students which represents the existing and potential house owners in Samarahan region as there are no official population frame to represent all potential and present home buyers
We choose postgraduate students because they have good purchasing power
A total of 170 questionnaires have been distributed but only 150 are reliable
All parts of the country economy
3. BBA has a floating-rate but the MMP still differs in the balance of financing at any point in time before the end of the contract and MMP the balance can never be larger than the original price or finance of the house. Rebates for early redemption under BBA cannot be specifically stated in the contract.
2. The return of the BBA is based on a fixed selling price (that uses the established interest rate as the benchmark). In MMP concept, the financer need not be tied to a fixed profit rate all through the financing meaning. This is because the rental rate can be revised regularly to reflect current market conditions. Undeniably, as argued earlier, the rental can be tied to some economic variables like Rental Index, House Price Index etc.
The Differences between the BBA and the MMP Contracts:
1. The value of the house under MMP always reflects the market price and the rental is determined by the market rental values and BBA concept is selling price of the house does not reflect the market value since the mark-up for the deferred payment is quite substantial.
Comparison between Musharakah Mutanaqisah (MM) and al-Bay` Bi-thaman Ajil (BBA)
Musharakah Mutanaqisah (MM)
A joint ownership.
BBA is the concept of Murabahah for the purchase and sale of properties.
Basically a deferred payment sale contract.
It is accepted internationally as Shari’ah compliant.
The return to the BBA is fixed selling price.
The bank buys the property from the customers and sells its back to the customer, plus it profit margin.
• MMP is more favoured financing method compared to BBA
• MMP is viable to the conventional floating rate financing since rental rate can be adjusted
• As subprime crisis argue by the scholars is because of selling of debt against debt is not allowed by shariah
• To achieve mortgage financing, we use the method of home financing in the Islamic ways, which is the Bay Bithaman Ajil (BBA) and
Musharakah Mutanaqisah Partnership (MMP)