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Ijarah and Shirkah Contracts In Islamic Finance

In: Hire Purchase Under Shirkah al-Milk (HPSM) in Islamic Banking and Finance

Author

Listed:
  • M. Kabir Hassan

    (University of New Orleans)

  • Muhammad Mostofa Hossain

    (University of Malaya)

  • Aishath Muneeza

    (International Centre for Education in Islamic Finance (INCEIF University))

Abstract

Islamic home financing serves as a means of financial support for those seeking to purchase their home. Bay’ bithaman ajil (BBA), musharakah mutanaqisah partnership (MMP), and ijarah mawsufah fi al dimmah (IMD) are designed to serve for the necessity of infrastructures. Typically, MMP is a form of diminishing partnership in which both the customer and the bank enter into a joint ownership agreement, while BBA is a deferred payment sale model where the bank purchases the house at an agreed price and subsequently sells it back to the customer at a higher price, including a profit margin, over a financing period and the IMD is a sale of future usufruct in exchange of immediate cash. In addition, in the present day, sukuk has become widely utilised by both Islamic corporations and government entities. It has gradually captured a growing portion of the global fixed-income market. Unlike traditional bonds, sukuk investors do not hold a debt obligation from the issuer. Instead, they own a proportionate share of the underlying asset linked to the investment. Among many types of sukuk, ijarah and musharakah sukuk are two of them. This chapter will discuss the above-mentioned financial products and their underlying issues.

Suggested Citation

  • M. Kabir Hassan & Muhammad Mostofa Hossain & Aishath Muneeza, 2023. "Ijarah and Shirkah Contracts In Islamic Finance," Springer Books, in: Hire Purchase Under Shirkah al-Milk (HPSM) in Islamic Banking and Finance, chapter 0, pages 169-188, Springer.
    • Handle: RePEc:spr:sprchp:978-3-031-50105-0_8
    DOI: 10.1007/978-3-031-50105-0_8
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