The implementation of Bai Bithaman Ajil as Islamic housing loan / Nurulain Mohamed Nordin

Home financing takes a large portion of peoples’ income. As alternatives to conventional interest-based home financing modes, several Islamic modes are currently in existence, the dominant among which are the al-Bay’ Bithaman Ajil (BBA) and the Musharakah Mutanaqisah Partnership (MMP) contracts. The BBA is a murabahah contract, based on buy-and-sell principle while the MMP consists of a musharakah (partnership) contract and an ijarah (rental) contract where the equity of the financier follows a diminishing balance method. The study reviews and analyzes the facility of Bay Bithaman Ajil (BBA) in house as it is implemented by Malaysian financial institutions from the fiqh point of view. Considering that BBA is the most preferred type of financing mode in the Malaysian Islamic banking industry and considering that it is also the most debated type of facility in terms of its validity and Shariah-compliance, the study reviews and analyzes the structure as well as the implementation of the facility.