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Available. Open Access. Open Access
Article
Publication date: 19 June 2018

Abdulbari Mashal, Amer Hajal, Om Kalthoum Majoul and Mir Riaz Ansary

This paper aims to investigate sale with the temporary exclusion of usufruct, a format debated in classical Islamic jurisprudence. More specifically, it examines the application…

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Abstract

Purpose

This paper aims to investigate sale with the temporary exclusion of usufruct, a format debated in classical Islamic jurisprudence. More specifically, it examines the application of this sale format in the diminishing partnership arrangement used by American Finance House LARIBA to finance house purchases. It analyzes the Sharīʿah issues and assesses the risks involved.

Design/methodology/approach

The research is qualitative, surveying and critically analyzing classical fiqh literature and contemporary juristic resolutions, as well as LARIBA’s financing documents. Finally, it systematically surveys the associated risk factors, first qualitatively, and then by quantifying them.

Findings

The research concludes that sale with the temporary exclusion of usufruct is a valid contract in Islamic law. When the usufruct is priced at market rate, the financing arrangement is genuinely Islamic and brings added value. Moreover, it is very effective in addressing risks for Islamic banks, particularly in countries with legal systems not designed to accommodate Islamic finance.

Originality/value

This study systematically examines all aspects of a contract that has not received sufficient academic attention, that has been underutilized by the Islamic finance industry and that is more fitting for implementation than many of the contracts currently being used.

Details

ISRA International Journal of Islamic Finance, vol. 10 no. 1
Type: Research Article
ISSN: 0128-1976

Keywords

Available. Open Access. Open Access
Article
Publication date: 19 June 2018

Ashraf Md. Hashim

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Abstract

Details

ISRA International Journal of Islamic Finance, vol. 10 no. 1
Type: Research Article
ISSN: 0128-1976

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