A Proposal of AMM (Adapted Mudarabah Model) for Shariah Compliant Home Financing in Malaysia

Abstract

This study aims to propose a Shariah compliant mode of house financing named as “Adapted Mudarabah Model” or abbreviated as AMM. The proposal is made after discussing the most two common schemes for Islamic home financing i.e. BBA (Bayʿ Bithaman Ajil) dan MM (Musharakah Mutanaqisah) and their Shariah related issues. Thus, it is exploratory and conceptual in nature. This Shariah compliant financing model is proposed due to the shortfalls in the BBA and MM models where there are some unresolved and controversial Shariah and legal issues. This study uses the concept of mudarabah in this model and suggests that by implementing this model, all of the issues discussed in BBA and MM can be mitigated as the model does not require the Islamic banks to fulfill any of the conditions and obligations of counter-values. The proposal discussed in this article could contribute to the diversification of Shariah contracts for Islamic financing products. It is one of the celebrated ways in developing Islamic finance practices. The discussions of this paper focus on the Shariah aspects of the proposed model especially on mudarabah and qard contracts. The technical applications presented stand as illustrations and require further investigations and examinations for further application.