FACULTY OF ECONOMICS AND MUAMALAT MASTER OF MUAMALAT ADMINISTRATION

ARTICLE REVIEW

PREPARED BY: FARHAN BT. HJ. ROSLI 3100094

Article Review Submitted to Mr. Asharaf Mohd Ramli in Partial Fulfillment of the Requirement for MGA8013 (APPLICATION OF FIQH MUAMALAT)

SEMESTER I SESSION 2011/2012

Nurdianawati Irwani Abdullah & Asyraf Wajdi Dusuki. (2006). Customers Perception of Islamic Hire Purchase (AITAB) In Malaysia Financial Institutions: Empirical Evidence. Paper presented in INCEIF Islamic Banking and Finance Educational Colloquium, Bank Negara Malaysia. Kuala Lumpur, 3rd -5th April. AITAB is one of the latest innovative products of Islamic banks is the Islamic hire purchase facility which is designed to meet the current demand and avoid certain risks in the financing of consumer durables and motor vehicles. AITAB can be utilized to finance a wide range of assets, either for individual or corporate customers. Therefore, this article the authors presents about the an empirical evidence on the customers perception of AITAB, and for the success of this article questionnaire survey had been conducted on 203 AITAB customers, aiming at eliciting their awareness and perception of AITAB. Through this article authors stated that as one of the most important players in service industry, banking is no longer regarded as a business dealing with money transactions alone, but also as a business that is ineluctably in need for winning over customers and retaining the old ones. As for Islamic financial institutions, customers satisfaction towards their products is very crucial mainly because of the fact that they have to compete with the long-established conventional banks especially in the Malaysian dualbanking system. One of the latest innovative products of Islamic banks is the Islamic hirepurchase (hereafter AITAB) facility which is designed to meet the current demand and avoid certain risks in the financing of consumer durables and motor vehicles. Therefore this article exploratory study aims at eliciting customers perceptions of AITAB facilities offered by Islamic banks in Malaysia. Moreover, a more specific research to study customers views on AITAB is almost non-existent. Therefore, it is imperative authors to survey the perception of customers of Islamic banks towards AITAB facilities offered. Hence, this article was deemed to be of significance in filling the important gap to the present literature on Islamic banking in general and AITAB in particular. The article consist seven sections, which is normally introduction in the first section. The next section begins by laying out the conceptual idea of AITAB and its mechanism and stated that AITAB combines lease contract and sale contract in on trading. Although it is deemed to be controversial from shariah view point, but many scholars in Malaysia approved this transaction.

In the following section authors gives a brief overview of AITAB operation in Malaysia which is not fully developed during the first ten years of Islamic Banking System. Only starting from 2005, conventional banks also offered Islamic banking products via Islamic window. And almost all financial institutions provide AITAB for vehicle financing, except Bank Pembangunan, RHB Islamic Bank, SME Bank, HSBC and OCBC. Anchor banks like Maybank, AmBank, Alliance Bank and Bank Muamalah offers AITAB for individual and corporate customers. Institutions like Affin Bank, Bank Rakyat, EON Bank, Hong Leong Bank, Public Bank and Southern Bank put sole concentration on vehicle financing due to increasing demands from the public and corporate customers. Based on the issues, although there are many literature review about the customers perception about the customers perception, authors said that the customers attitude and perception towards particular Islamic banking products are still lacking. Therefore, the authors are doing the survey to analyze customers satisfied of AITAB based on their facility, source of information and customers perception. And as the finding reveals that a 79% of 230 AITAB customers are satisfied with AITAB. This shows a strong potential of AITAB to be further developed into a more competitive and attractive Islamic banking product that can appeal to various groups of customers. Then, the respondents overall views of AITAB are studied, whereby they highly regard it as Sharah-compliant product and a good financing alternative to purchase an asset. Overall this article are provide a clear and strong signal to the bankers that efforts need to be intensified in educating the public about the distinctive characteristics of AITAB and how it may suit the interest of customers in financing their assets. There is a huge potential of AITAB to be marketed to various segments of customers comprising those who are concerned with the legitimacy of the facility, and those who seek for convenience and less complicated transactions. This relates to the importance of simplified and ambiguity-free documentation and procedures in the transaction. Banks must also ensure their staffs are adequately trained to handle customers enquiries and provide sufficient explanation about the facility.

Asmadi Mohamed Naim. (2011). "Purchase Undertaking Issues In Musharakah Mutanaqisah Home Financing". ISRA International Journal of Islamic Finance. Vol.3. Issue 1. Musharakah mutanaqisah or diminishing musharakah is one of the alternatives which is currently available in the market. However, the implementation of the concept has also raised some controversial elements, such as the element of capital guarantee or capital protection that contradicts the essence of a partnership contract under the virtue of permissibility to promise. Therefore, the study found that the players have included the elements of capital guarantee for financiers by declaring that this product is purely shirkat almilk from the time when the tenure ended. The article that had done by Asmadi Mohamed Naim discuss the issues of purchase undertaking in musharakah mutanaqisah home financing as practiced by Islamic banks in Malaysia. The study also examines the legitimacy of first and second promises by the customer to gradually purchase the bank's portion ang to give rights to the bank in the event default. To issue of purchase undertaking in musharakah mutanaqisah home financing as practiced by Islamic banks in Malaysia, must following some guideline and requirement Islamic law. For Hanafis scholar determined two main conditions for common shirkah which are firstly, the subject matter of shirkah must fall under a matter that can be transacted under an agency contract. Secondly, the profit must be pre-determined in ratio or percentage. The syirkah is void if there was no pre-determined ratio or the profit is pre-determined in specific units of value such as one thousand dollars. Based on discussion made by Mustafa Al-Zarqa on shirkat al-milk undivided ownership actually is always within joint ownership when such joint ownership is against the subject matter only without any agreement to jointly invest it thus it can be called as shirkat al-milk. In contrast to such partnership is shirkat al-'aqd where two or more people agreed to invest money or skill for a portion of the profit that was incurred in a business and industrial partnership. Next, Usmani discussed on issue of purchase undertaking to buy the financier's share in stages. Usmani deems it permissible to fix the purchase undertaking in home financing as it falls under shirkat al-milk plus it meets the basic needs of society. In addition, issue of second undertaking to buy the financier's share in the event of default are discussed through interviews and found that the financiers need this kind of undertaking in order to

protect them from ownership risk when disposing of the assets as there are several possibilities regarding the disposing process of the asset such as the value of the depreciated asset. As a result the authors found that the home financing program is shirkat al-milk in its initial stage, but it cannot be considered permanently as shirkat almilk as it does not comply with all the features of shirkat al-milk. And also found that the second undertaking to purchase the banks share by the customer explicitly contradicts the Qurnic verse which obliges the debtor to postpone the debt repayment when the borrower is genuinely unable to pay. Due to what author has founded he stated some recommendations that able to help the financiers in dealing with several risks such as default risk, ownership risk and disposing of the customers asset risk. At the same time, the Islamic banks will be able to avoid their dependency on imposing non-logical steps when protecting their interests.

Zubair Hasan. (2011). Islamic Home Finance in the Social Mirror. ISRA International Journal of Islamic Finance. Vol. 3. Issue 1. Shelter is one of the basic needs for human beings. Its availability for the people is an Islamic imperative. Among the basic necessities of civilized living, shelter ranks only next to food and clothing. Housing affects health, culture and civility of people. Poor and inadequate housing breeds crime, creates unrest, lowers productivity and slows down growth. Therefore in Islam, the fulfillment of their basic needs, including housing, is the individuals own responsibility but to make up deficiencies is a state obligation. The author reveals that the shortage of homes is especially scary in and around the metropolitan centers; their expansion rarely knows any limits.2 The Zabbln and the City of the Dead are both well-known squatter colonies in Cairo. Kibera in Nairobi and the postapartheid Inner City of Johannesburg have long been problematic squatter centers. In India the population of Mumbai was estimated at 13.8 million on March 22, 2011, and nearly 6 million of them are squatters living in horrible conditions. Therefore In Islam, the fulfillment of their basic needs, including housing, is the individuals own responsibility but to make up deficiencies is a state obligation. This article focused at Islamic home financing models in a broader societal context. It evaluates the efficacy of the current financing structures practiced and suggests a new approach. The proposed model is shown as superior to the existing ones. It meets the norms of equity, fair play and openness and does not, presumably, violate any other Islamic norm. In evaluating the current modes of finance that Islamic banks generally use to provide credit for housing, one can hardly ignore the overall scenario. But author resisted and proceed to evaluate the more popular models for home financing which is the Bay bithaman jil (BBA) contract and new structure mushrakah mutanqiah partnership (MMP) or the Diminishing Partnership Model (DMP). The author had gave briefly explanation about the BBA in this article. The author went into long discussion about MMP model and conventional model. And to make it features and workings of this two model clearer for comparison author use illustrations. When we see the illustration there is little difference in the operational mechanism of the conventional model and the much-lauded Islamic MMP in the literature. In both cases, the payable amount diminishes as identical installments are paid and both have

the advantage of regular cash inflows for the bank which enhances the turnover of resources, improves liquidity and mitigates risk in some measure. Since the present financing practices are steeped in confusion and controversy, therefore in this article author present for the readers consideration a DMP and show its efficacy for Islamic home financing relative to other models. When come to the main focus of the topic Social Mirror in this article stated that The difficulty with the Muslim countries is that they have not yet been able to free themselves fully of the Western thought process, value system and cultural ethos that they perforce acquired during colonial rule. They did talk of Islamic finance and wanted to move in that direction but could not go far on the road for reasons not always of their own making. Islamic economics and finance took off well but now charter the unchosen course. Islamic institutions cannot find roots and deliver in a set-up dominated by alien ways and ends. Islamic finance could not show up during the long colonial occupation of their lands. After independence too, Islamic institutions could not loosen the strangulation. The concern for housing because of Islamic insistence on the fulfillment of basic needs does not form the core of planning in Muslim countries. The rivers of finance flow down to fertile lands; they do not climb up into the ivory towers of idealism. Based on this issue, author gave a few more suggestions for improving the contribution of Islamic Finance in the housing sector, here are some of the suggestion : 1) Assign a high priority to poverty reduction in national plans, a good part of the allocation going to the promotion of low cost housing. 2) Establish National Housing Foundations with regional offices. 3) Persuade and, if need be, instruct banks to support the national priorities. 4) Muslim countries can establish an apex body for integrating various country programs and support research in designing and construction of cheap yet comfortable homes. With the information in this article we can say this is a good article because the issues and the suggestion are really good to the nation and society.