Mathematical model in Islamic mortgage financing with murabahah and musharakah mutanaqisah contracts

Abstract

The subprime mortgage crisis was a multinational financial crisis that occurred in 2008. The subprime mortgage is a program by the United States government to provide housing loans for borrowers with unreliable credit histories. The impact of the crisis highly influences the development of the financial market around the world, including Indonesia. The main focus of the research is to construct a simple mathematical model for mortgage financing, especially housing, which is based on Islamic laws. Rarely did previous studies discussed this matter, especially in Indonesia. The construction of the model depends on the contract (aqad) made. The contracts that will be discussed in this study are the murabahah and musharakah mutanaqisah (MMQ) contracts. In the MMQ contract, the ujroh (rental cost) is going to be determined by depreciation using the straight-line method. Based on simulation using the example of a real contract, the obtained rates of return achieved by the simulation with simple murabahah model is 17.84%, murabahah with an annuity of an installment is 11.4%, Islamic bank housing mortgage simulation application 12.19%, and MMQ is 6.87%. This result shows that the calculation involved in the contract should be observed carefully.