Mohd Yusoff, Syarah Syahira and Oseni, Umar A.
(2019)
Standardisation of legal documentation in Islamic home financing in Malaysia: a literature survey.
Journal of Islamic Accounting and Business Research, 10 (3).
pp. 448-465.
ISSN 1759-0817
Abstract
Purpose – This paper aims to provide an analytical literature survey of selective studies on legal
documentation in Islamic home financing with particular reference to Malaysia.
Design/methodology/approach – This study adopts the legal positivist methodology, with
particular reference to inclusive legal positivism which takes into consideration the possibility of moral
values challenging positive law. Within the context of this study, though positive law provides for rules
that govern contractual matters in Islamic home financing, standardisation is a functionality of
maslahah (or public interest) which transcends the mandatory provisions of positive law but helps to
protect the interest of all stakeholders. This is analysed through a systematic literature review which
aims to provide practical insights into industry practices relating to Islamic home financing in
Malaysia.
Findings – This paper provides information on the standard documentation used by conventional
banks and existing practices of diverse models of legal documentation in the home financing sector
within the Islamic financial services industry in Malaysia. It also recognises the need for standard
documentation that is not only Sharīʿah-compliant but also consumer-friendly, as the terms of any
standard financing agreement ought to ensure consumer protection. There is also the need for a
Shari’ah-compliant Sales and Purchase Agreement, as it forms part of the complete set of legal
documentation for Islamic home financing.
Research limitations/implications – It is not an exhaustive study, as it did not consider practices in
other jurisdictions offering Islamic financial services and products but only focusses on Malaysia. Though
one may not generalise the findings of this study, Malaysia remains a leading model and a global hub for
Islamic financial services and products.
Practical implications – A very useful source of information on the current state of legal
documentation in Islamic home financing in Malaysia and the prevailing practices in the industry,
which may serve as a guide for policymakers such as the Association of Islamic Banks in Malaysia
(AIBIM) to embark on a full scale project of standardisation of all the legal documentation used in
Islamic home financing.
Originality/value – This study fulfils an identified need of standardisation of legal documentation used in
Islamic home financing in Malaysia and offers practical help to policymakers and future researchers starting
out on systemic reforms.
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