Syariah Risk in Musyarakah Mutanaqisah Home Financing Contract in Malaysia

Abstract

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.