Enhanced Musharakah Mutanaqisah (EMM) Home Financing: A True Partnership-based Home Financing Model

Despite being considered one of the most Shari’ah compliant and flexible Islamic finance contracts, the current application of Musharakah Mutanaqisah (MM) in home financing faces many criticisms, as one that breaches many of the Shari’ah principles underlying the contract. When we scrutinize the arguments underlying those criticisms, results confirm that compromises made to some Shari’ah contracts make the contemporary application of MM in home financing very controversial and rigid to meet different real-life demands of the home financing customers. Following our analysis, we propose the Enhanced Musharakah Mutanaqisah (EMM) home financing model, which addresses most of the Shari’ah controversies and rigidities of currently practiced MM home financing products. This chapter provides details of our proposal and explains how it would serve as a true partnership-based and flexible home financing model.