TOWARDS AN APPLICATION OF MUSHARAKAH MUTANAQISAH PRINCIPLE IN ISLAMIC MICROFINANCE
2013; UNIMAS Publisher; Volume: 14; Issue: 2 Linguagem: Inglês
ISSN
1511-6670
AutoresNorma Saad, Dzuljastri Abdul Razak,
Tópico(s)FinTech, Crowdfunding, Digital Finance
ResumoABSTRACTThis paper is aimed at explaining the application of musharakah mutanaqisah into a newly context of Islamic microfinance. The term Islamic microfinance is similar to that of conventional but it is varied in terms of Shariah principles used and the prohibition of interest in business operations. Further, microfinance institutions have been established in many developing countries to solve the problem of poverty. In muslim countries, Islamic microfinance can be a powerful tool to fight poverty if these institutions are managed in the right way. Islamic finance scholars have argued that the provision of equity based financing by Islamic financial institutions will facilitate toward achieving the Islamic socio-economic objectives which include social justice, economic growth, efficiency and stability. This paper illustrates that musharakah mutanaqi?sah, an equity based financing instrument, is better than debt-based financing because of its flexibility and end result in the ownership of assets on the part of the customer. The paper also highlights musharakah mutanaqisah as an innovative mode of financing and should be a preferred instrument of financing by Islamic microfinance institutions. Our study provides further evidence regarding the applicability of musharakah mutanaqisah into the context of microfinance, thus closing the research gaps. Limitation and potential future work are outlined to assist future researches in the area.Keywords: Islamic Microfinance, Profit-Loss Sharing, Musharakah Mutanaqisah, Microfinance, Poverty(ProQuest: ... denotes formulae omitted.)1. INTRODUCTIONThe Islamic banking and finance was first established on the principle of profit and loss sharing (PLS) and the prohibition of riba (usury). As an alternative to riba, it is anticipated that PLS mode of financing will notably eradicate the inequitable distribution of income and wealth and may escort to a more efficient and optimal allocation of resources. Studies however, have shown that there has been a complete shift in Islamic banking and finance from supposedly PLS banking to a sales-based and debt-based system (Saeed, 2004; Dusuki and Abozaid, 2007; Asutay, 2007). The activities of Islamic banks depend largely on contracts that are regarded as mark-up based, which is similar to lending on the basis of fixed interest. The use of the more risky PLS contracts such as a mudarabah and musharakah has been very minimal.The current practice in Islamic microfinance is very much similar to that of Islamic banking. We explain this assertion based on previous works (Obaidullah, 2008; Obaidullah and Khan, 2008; Seibel, 2005). According to Obaidullah (2008), Islamic microfinance institutions (IMFIs) across the globe utilize a variety of Shariah-compliant mechanisms, such as murabahah, bay bithaman ajil (BBA), ijarah, bay al salam etc. All these modes of financing create debt. In Indonesia, even though Obaidullah and Khan (2008) reported that IMFIs there uses reasonably balanced with an array of products - based on mudarabah, musharakah, murabahah, ijarah and qard al-hasan, it is a new trend because Seibel (2005) reported that in BPRS (one of IMFIs operating in Indonesia), the main financing product is murabahah, i.e. a sales contract between bank and customer with a fixed profit margin for the bank. Flexible profit-sharing, which is cumbersome to calculate, is of minor importance. In the Middle East, the Hodeida Microfinance Program in Yemen followed the model practiced by Grameen Bank in Bangladesh, however, it uses murabahah mode of financing instead of PLS mode of financing. Obaidullah and Khan (2008) reported that in Bangladesh, the Islamic microfinance institutions there have been depending on deferred-payment sales (bay al mu'ajjal) mode of financing. The review of these studies has demonstrated that a study on the applicability of musharakah mutanaqisah remained limited and inconclusive. Creating an Islamic microfinance institution on the basis of murabahah, BBA and ijarah, to mention some is not sufficient to reflect an Islamic business philosophy (Haron and Shanmugam, 2001). …
Referência(s)