Islamic home financing instruments in Malaysia: the emerging issue of financial (Un)affordability

Md Zabri, Mohd Zaidi and Haron, Razali (2018) Islamic home financing instruments in Malaysia: the emerging issue of financial (Un)affordability. In: 6th ASEAN Universities International Conference on Islamic Finance (AICIF), 14-15 November 2018, Makati, Manila. (Unpublished)

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Abstract

This study compares and contrasts Islamic home financing instruments such as bay bithaman ajil and musharakah mutanaqisah (MM) by Islamic commercial banks, government-owned home financing institution and financial cooperative. Mathematical simulations were carried out in examining the purchase- and repayment-affordability of Islamic home financing instruments by the above-mentioned providers. We have shown that Islamic home financing instruments by Islamic commercial banks are an unaffordable option for most Malaysians, even vis-à-vis the conventional home loan. Although government-owned home financing institution provides the cheapest option for homeowners, it is, however, restricted to civil servants. MM by the financial cooperative, on the other hand, is a workable, more financially affordable option to potential homeowners. The reason for this is that, unlike Islamic commercial banks, MM uses rental rates as a benchmarking tool which is more flexible as well as more responsive to its member-customers’ specificities of localities and types of homes. As a result, it may reduce the cost of home acquisition (purchase-affordability) and the amount of monthly instalments (repayment-affordability) by homeowners in Malaysia.

Item Type:	Conference or Workshop Item (Plenary Papers)
Additional Information:	4581/70254
Uncontrolled Keywords:	Islamic home financing, bay’ bithaman ajil, musharakah mutanaqisah, financial cooperative
Subjects:	H Social Sciences > HG Finance > HG1501 Banking 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:	Dr. Razali Haron
Date Deposited:	13 Feb 2019 15:45
Last Modified:	13 Feb 2019 15:45
URI:	http://irep.iium.edu.my/id/eprint/70254

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