Risks in Islamic banking consist of the usual risks inherent in conventional banking. However, Islamic banking tend to be exposed to a unique set of risks in addition to those, which are the Syariah risks. Equity-based home financing contract (especially Musyarakah Mutanaqisah home financing) are exposed to high risks. If so, is Syariah risk considered as one of the risks that affect Musyarakah Mutanaqisah home financing contract? In addition, what is the definition of Syariah risk? In this regard, the paper aims to identify and analyse the Syariah risks inherent in Musyarakah Mutanaqisah home financing contract in Malaysia. The research design used in this study is explanatory design. The primary data used for this study were conducted through a semistructured interviewing method which includes purposive sampling. Secondary data involved in this study is from qualitative document research. Three informants specializing in the field of Islamic banking were involved in this study. The findings of the study consist of the definition of Syariah risk inherent in Musyarakah Mutanaqisah home financing contract in Malaysia and its impact on Islamic Banking generally.
The Musyarakat Mutanaqisat financing contract in Malaysia is still inadequate compared to other countries such as those in the Middle East. In Malaysia, there are 10 Islamic local banks comprise of Affin Islamic Bank Berhad, Maybank Islamic Berhad, CIMB Islamic Bank Berhad, Hong Leong Islamic Bank Berhad, RHB Islamic Bank Berhad and others. As for now, only two local banks in Malaysia offer the Musyarakat Mutanaqisat home financing contract. The banks are Affin Islamic Bank Berhad & RHB Islamic Bank Berhad. Musyarakat Mutanaqisat home financing contract is less favoured by local banks in Malaysia because it brings higher risk compared to other home financing contracts (Muhammad, 2014). The high risk has to be borne by the banks especially due to the sharing element in Musyarakat Mutanaqisat home financing contract (Rulindo, 2009). Is this statement true? If so, what are the actions that banks need to take in order to control these risks? This article aims to identify, analyse, and summarise the risk management in the implementation of Musyarakat Mutanaqisat home financing contract in Malaysia. A total of four informants includes the informants from Affin Islamic Bank Berhad and RHB Islamic Bank Berhad as well as two academic experts in the field of Islamic banking are involved in the discussion of risk management in the Musyarakat Mutanaqisat home financing contract. Purposive sampling method is used in this study with the semi-structured interview being conducted with the informants. The findings of this study comprise of discussions on the types of risks inherent in the Musyarakat Mutanaqisat home financing contract. The risks consist of credit risk, liquidity risk, Syariah risk, operational risk and investment equity risk. The risk management of the Musyarakat Mutanaqisat home financing contract by Islamic banking institutions includes three stages namely the early stage of the agreement, the current stage of the agreement and the final stage of the agreement.
Islamic home financing is a service offered by Islamic banks according to the Islamic principle. In Malaysia, it has been offered since the early 1980s. The demand for Islamic home financing in Malaysia has increased over time. Therefore, this study would like to delve into the short-run and long-run relationship between the factors involved in Islamic home financing. Past studies highlighted the microeconomic factors and macroeconomic factors in Islamic banks that contribute to the growth of Islamic home financing in Malaysia. Thus, this study would include four factors comprised of deposits, liabilities, GDP, and government expenditure. Deposits and liabilities are categorized into microeconomic factors, whereas GDP and government expenditure are macroeconomic factors. The first objective is to identify the short-run and long-run relationship between the factors mentioned above on Islamic home financing in Malaysia. The second objective is to analyze the causality effects of the factors on Islamic home financing in Malaysia. The methodology comprises of quantitative research design. Data collection is based on secondary data collection, which was retrieved through documentation review and statistical highlights from Bank Negara Malaysia. The data comprise the first quarter of 2010 until the second quarter of 2021. Analysis data is conducted through an econometric approach within time series data which is the ARDL test and Granger causality test. The findings of this study would emphasize the importance of microeconomic factors and macroeconomic factors on Islamic home financing. It would encourage the supply and growth of Islamic home financing by Islamic banks in Malaysia in the future.
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