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Islamic norms, the excel formula and home financing models


  • Hasan, Zubair


This paper adds to the series of writings on Islamic home financing presented and published by the author since February 2010. It spells out certain norms Islamic banks must observe in home financing and demonstrates that the conventional model based on an Excel formula does not meet the stated norms. It may well be emphasized that in Islam the question of observing these norms arises before, and not after, the selection of the formula; additional juristic requirements may only follow subsequently. Is it not then strange many Islamic banks are using the formula to determine the periodic instalment payments in their home financing programs? The paper finds, for example, the popular Musharakah-Mutanaqisa Partnership (MMP) Islamic home financing model to be non-compliant with the stated norms. It presents a new model―the Zubair Diminishing Balance Method (ZDBM) ― and argues that the alternative is not only fully observant but is superior to the MMP model on some other counts as well.

Suggested Citation

  • Hasan, Zubair, 2012. "Islamic norms, the excel formula and home financing models," MPRA Paper 47955, University Library of Munich, Germany, revised 2013.
  • Handle: RePEc:pra:mprapa:47955

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    References listed on IDEAS

    1. Hasan, Zubair, 2011. "Riba in La-riba contracts: where to turn in Islamic home financing?," MPRA Paper 35421, University Library of Munich, Germany.
    2. Hasan, Zubair, 2010. ""Islamic house financing:current models and a proposal from social perspective," MPRA Paper 31638, University Library of Munich, Germany, revised 02 Apr 2011.
    3. Edib Smolo & M. Kabir Hassan, 2011. "The potentials ofmusharakah mutanaqisah for Islamic housing finance," International Journal of Islamic and Middle Eastern Finance and Management, Emerald Group Publishing, vol. 4(3), pages 237-258, August.
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    Cited by:

    1. Hasan, Zubair, 2014. "Risk sharing versus risk transfer in Islamic finance: revised," MPRA Paper 62826, University Library of Munich, Germany, revised Mar 2015.
    2. Hasan, Zubair, 2014. "Risk sharing versus risk transfer in islamic finance," MPRA Paper 62810, University Library of Munich, Germany, revised Mar 2015.
    3. Hasan, Zubair, 2015. "Risk sharing versus risk transfer in islamic finance," MPRA Paper 62847, University Library of Munich, Germany, revised Mar 2015.
    4. Hasan, Zubair, 2014. "Aggravating housing situation: Return and ownership issues in Islamic home financing revisited," MPRA Paper 60642, University Library of Munich, Germany.

    More about this item


    Home finance; Excel amortization formula; Compounding; Islamic norms; Justice.;

    JEL classification:

    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles
    • G2 - Financial Economics - - Financial Institutions and Services


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