Diminishing Musharaka & Shariah

Top 20 FREQUENT WORDS

financier 31 customer 28 diminishing 22 musharakah 20 rent 19 sharia 16 conventional 15 islamic 15 products 13 lease 12 mortgage 11 purchase 11 finance 8 customers 7 financial 7 mortgages 7 payable 7 consequence 6 landlord 6 partnership 6 plans 6

DOCUMENT KEY POINTS

• does the diminishing musharakah reflect the spirit of sharia tariq hameed analyses the most popular type of islamic mortgage the diminishing musharakah and explains how it differs from conventional mortgages and its treatment from a tax and regulatory perspective since the government has introduced a number of measures equalising the tax treatment of islamic mortgages with a view to creating a level playing field for financial institutions and customers

• step as security for the customer s obligations to make payments of rent under the lease and acquire the financier s share in the property at a fixed price under the diminishing musharaka agreement the customer charges by way of security in favour of the financier its interests in the property under the lease and the diminishing musharaka agreement
• differences between a diminishing musharakah and conventional mortgage a conventional financier will see a number of parallels between a conventional mortgage and a diminishing musharakah product

• furthermore if the financier is at any point considered to have control over any parts of the property perhaps only relevant when the financier enforces its security or the lease is forfeited by the financier it will owe a duty of care to see that visitors will be reasonably safe in the property for the purpose for which they were invited or permitted to be there

• usage screening an islamic bank providing a diminishing musharakah product as a landlord is required to take the extra step of ensuring that the use of the property leased to the customer is sharia compliant
• although a conventional bank is not subject to such requirements by sharia a financier must be wary of the reputational risk of providing a diminishing musharakah product to a customer who intends to use the property for a use that is not sharia compliant e

• there is further scope for developing products that are closer to the a spirit of sharia but the above will have illustrated that perhaps diminishing musharakah is a a fairer product for the customer not taking into account pricing considerations in contrast with conventional mortgages and as a consequence there may be a market for such products among the ethical non muslim market

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DOCUMENT WORD ANALYSIS

Main Category

AlHuda Material\islamic banking

KeyWords

contract price sale asset financing lease client purchase ijarah payment profit musharakah lessee amount commodity housing agreement contracts ownership project

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DOCUMENT REFERENCES

Number of Pages

5

Published Date

2009-12-22 22:16:08

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