3. Musharakah Mutanaqisah Partnership (MMP)
MMP based on diminishing partnership concept.
MMP consists of three contracts which are musharakah,
ijarah as well as bay’
First, the customer enters into a musharakah under the concept of
‘Shirkat-al-Milk’ (joint ownership) agreement with the bank to co-
own the asset being financed
Second, the bank leases its share in the asset ownership to the
customer under the concept of ijarah.
4. BBA as Home Financing
A sale contract which provides the buyer the benefit of a
deferred payment
The price is deferred and BBA can also be categorized as a
credit sale and if the payment is made by installments.
This concept has been widely used in Asia country for
example Malaysia, Indonesia and Brunei
6. Case of Arab Malaysian Finance Berhad vs Taman Ihsan
Jaya (2008)
The BBA in house financing, is regarded as a loan transaction and
not a sale and purchase transaction
BBA prescribed that if the borrower defaulted on the loan, the
defaulting borrower is to repay to the bank the whole total of the sale
price
BBA was held not only contain the riba’ element, its nature and
operation were also deemed inequitable and unjust
to purchasers/borrowers
7. Impact of BBA to customers
Customers must pay the home installments or purchased
despite the home has been neglected by the developer
BBA give higher cost compared to the conventional
9. Advantages of MM
Bank
MM is based on partnership and leasing contract where both
Mushakarah partners assume the risks of property acquisition.
MM is accepted internationally
Easy restructuring / rescheduling process, need not be tied to
the bank sale price
Customers
Just product
Customers own the asset 100% upon full redemption
under MM financing
10. Different between BBA and MM
BBA MUSYARAKAH MUTANAQISAH
Debt Type Financing A joint ownership
More complicated, and buyer only can own
the property right after the full payment of
the full tenor has been made.
More flexible, can own the property earlier by
redeeming earlier the principal sum of the bank
without the need to compute the rebates.
The return of the BBA is based on fixed
selling price
The bank needs not bind to a fixed profit rate
throughout the financing tenor.
The rental can be revised periodically to reflect the
current market situation
The customer will always end paying almost
four times the original cost as it may be
burdened for the lower-income group in
particular.
There is no interest charge or advanced profit
involved as it is based on the concept of rental
payments and redeeming the bank’s shares in the
property
Many may be of the opinion that BBA is
similar to conventional loans.
It is accepted internationally as Shari’ah compliant
11. Challenges in Implementing Musyarakah
Mutanaqisah
How Islamic banks can utilize Musharakah Mutanaqisah
based financing contract to cater the low income customers.
To educate the representation of Islamic banks on the true
objectives of Islamic banks
To promote Musharakah Mutanaqisah
Islamic banks are bound to Bank Negara Malaysia’s
regulations
12. Conclusion
To conclude, Islamic finance has continued to expand in the
more challenging and competitive international financial
environment.
The products that they are offering now have been
improved from time to time.
With the cooperation among government, regulators,
bankers, Shariah scholars as well as customers, this
product has lots of potential and more Shariah complaint
compared to previous financing product, which is Bai’
Bithaman Ajil.
