The Prohibition of Riba and the alternative methods of home financing : a case study of Malaysian Muslim home buyers

The objective of the "The Probihition of Riba and the alternative methods of home financing: a case study of Malaysian Muslim home buyers" thesis is to analyze the Islamic home loan financing offered by banks and financial institutions in Malaysia and the characteristics of Malaysian home buyers and/or home owners towards the product. In the thesis, consideration has been given to economic, social and environmental parameters which selection and factors influencing have been ranked accordingly. This study uses quantitative study similar to what was employed in previous researches. A self-administered survey questionnaire to 320 respondents in Kuala Lumpur, Malaysia was held in October 2007 which 301 respondents returned the survey with a response rate of 89 percent. In this study, the results were presented from mean analysis, indepedent t-test, ANOVA and logistic regression analysis. The study presents interesting findings on Al-Bay Bithaman Ajil (BBA) concept of home loan financing to the alternative Musharakah Mutanaqisah (MM) home loan financing, which MM home loan financing has more benefit than BBA home loan financing. Currently, only BBA home loan financing has been widely used within bank and/or financial institutions in Malaysia. The study also indicated that despite of religion or race, every respondent has their own view provided they were given sufficient information and/or know of the Islamic home loan financing. The logit model developed in this study identified "education" and "sources of Islamic home loan financing" as having an influence on purchasing home behavior with "home cost" variable taken into account. Hitherto with Bumiputra privileges and certain pro-Bumiputra policies in Malaysia, Malays community has more opportunities than non-Malays community in buying homes due to Bumiputra Laws which have been established in the Malaysian New Economic Policy (NEP) since 1971. The NEP adopts the goal of poverty eradication and economic restructuring so as to eliminate the identification of ethnicity with economic function. Bumiputra privileges and quotas are based on Article 153 of the Constitution that provided special rights for the Malays. With all privileges given by the Government abovementioned, it may affect the socio-economic characteristics which influence to the decision to purchase a home. Nevertheless, regardless of ethnicity or religion, Islamic banks have greater social and moral responsibility to ensure that their principles of financing are fair to everyone. The Malaysian Islamic financial sector is seen as one of the most progressive and atrractive in the world given the numerous incentives planned and further liberation in the coming years. Malaysia has a comprehensive regulatory and supervisory framework that caters to the unique charactertics of Islamic finance with the strong financial standards, such as that corporate governance, transparency, disclosure, accountability, market discipline, risk management and customer protection. With these elements, new attractive schemes can be developed to meet Malaysian bank customers' needs. This study provides various views of Islamic home loan financing in Malaysia as an alternative to conventional home loan financing