Diminishing Partnership As An Alternative Islamic Home Financing In Malaysia: Issues And Perceptions
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Date
2011-01
Authors
Abdul Razak, Dzuljastri
Journal Title
Journal ISSN
Volume Title
Publisher
Universiti Sains Malaysia
Abstract
Home is a basic necessity for everyone. The Bai Bithaman Ajil (BBA) or
Deferred Installment Sales facility is the most predominant mode of home financing
in Malaysia since the establishment of Islamic banking in 1983. In this transaction,
the bank buys the property from the customer and sells it back to him with added
profit for payment at a later date. In doing so, the bank capitalizes its profit up front
in the sale of the property. The concept is similar to conventional debt financing
which often results in high cost and injustice. Given these controversial features of
BBA, it is anticipated that there are several issues on its operations. An alternative
concept currently emerging is based on Diminishing Partnership (DP). In this
concept, the bank and customers are partners and take joint ownership of the
property. The customer pays the bank rent and redeems the bank‟s share on monthly
basis until full settlement upon which the house will be transferred from the bank to
the customer.
Description
Keywords
Diminishing Partnership , Islamic Home Financing