Rental yield as an alternative to interest rate to price musyarakah mutanaqisah home financing in Malaysia

Redzuan, Nur Harena and Kassim, Salina (2017) Rental yield as an alternative to interest rate to price musyarakah mutanaqisah home financing in Malaysia. In: International Academic Conference on Business and Economics (IACBE 2017), Kuala Terengganu, Terengganu. (Unpublished)

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Abstract

The current practice of the Islamic banks in Malaysia is relying on the market interest rate as the reference benchmark pricing for musyarakah mutanaqisah home financing. It has been a subject of intense debate among scholars, researchers, industry players, and policymakers. While it is not prohibited, Muslim scholars have highly discouraged this practice as it could lead to a possible convergence between the practices of the Islamic banks and the conventional counterparts. Therefore, this study proposes rental yield an alternative reference benchmark pricing mechanism for musyarakah mutanaqisah home financing. The aim of the study is to assess whether rental yield is reflective of the real economic conditions. In achieving its objective, the study tests the relationships between rental yield with the macroeconomic and housing market variables. The study focuses on Malaysia and uses annually data frequency covering the period from 1988 to 2015 using Autoregressive Distributed Lag (ARDL) cointegration test. The study provides evidence that the proposed rental yield has long-run and short-run relationships with macroeconomic and housing market variables. The analysis shows that a short period required for the model to adjust back to the long-run equilibrium. The findings of this study would provide important insights on the viability of rental yield as an alternative to interest rate to price musyarakah mutanaqisah home financing.

Item Type:	Conference or Workshop Item (Plenary Papers)
Additional Information:	8441/69550
Uncontrolled Keywords:	Islamic finance; musyarakah mutanaqisah home financing; reference benchmark pricing; rental yield
Subjects:	H Social Sciences > HG Finance > HG3368 Islamic Banking and Finance
Kulliyyahs/Centres/Divisions/Institutes (Can select more than one option. Press CONTROL button):	Institute of Islamic Banking & Finance (IIiBF)
Depositing User:	Nur Harena Redzuan
Date Deposited:	12 Feb 2019 16:17
Last Modified:	12 Feb 2019 16:29
URI:	http://irep.iium.edu.my/id/eprint/69550

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