Mortgage contracts in Islamic home finance: Musharakah Mutanaqisah program vs. Zubair diminishing balance model
The present paper attempts two demonstrations. First, it shows that the Excel formula Islamic banks invariably use to determine the fixed installment payments in home financing amortization has explicit compounding of return. Once the installment is based on that formula, the subsequent claims that in implementation the charge becomes free of interest hardly remain tenable. Second, the paper proposes an alternative home finance model where the mortgage contract has several merits over the structure in common use i.e. the musharakah mutanaqisa program or the MMP. The proposed model is cheaper for the buyer while the margin of return for the banker is not reduced; thus, painting a win-win situation for both. It attracts no juristic doubts. Some bankers of international repute have already hailed the model as an innovative useful breakthrough in the area of Islamic finance. Finally, the model aligns better than others with the maqasid or the objectives of the Islamic law.
|Date of creation:||Jun 2012|
|Date of revision:|
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- Hasan, Zubair, 2010.
""Islamic house financing:current models and a proposal from social perspective,"
31638, University Library of Munich, Germany, revised 02 Apr 2011.
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- Hasan, Zubair, 2011.
"Riba in La-riba contracts: where to turn in Islamic home financing?,"
35421, University Library of Munich, Germany.
- Hasan, Zubair, 2012. ""Riba in La-riba contracts: where to turn in Islamic home financing?," MPRA Paper 38166, University Library of Munich, Germany.
- Hasan, Zubair, 2011. "Riba in La-riba contracts:where to turn in Islamic home financing?," MPRA Paper 34386, University Library of Munich, Germany.
- Matthew Chambers & Carlos Garriga & Don E. Schlagenhauf, 2007. "Mortgage contracts and housing tenure decisions," Working Papers 2007-040, Federal Reserve Bank of St. Louis.
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