Nurfadhlina Abdul Halim

The modification of existing Bai Bithaman Ajil (BBA) instrument by using the concept of qardhul hassan and flexible sharing ratio

Bai Bithaman Ajil (BBA) instrument as the main mode of financing has become the biggest leap in the revolution of real estate purchase. Through many years of developing and refining its usage in financial institutions, BBA has confronted several argumentation and debate among scholars on its conformity towards Shariah. Although there are cases of inconsistency findings when it comes to conformity towards Shariah, BBA is still one of the predominant, accepted mode of financing especially in Malaysia. Therefore, this paper will prove that BBA instrument using the approach of Constant Rate of Return (CRR) is mathematically identical to the conventional approach which is annuity. Besides, this paper will also provide the amortization of CRR. It is proven that CRR formula is likely based on the amortization of conventional approach. Besides, this paper discusses mainly on the incompliance of BBA towards Shariah and hence will introduce the proxy for BBA instruments by implementing profit-loss sharing (PLS). The modified BBA instrument is develop by deliberating the concept of qardhul hassan as its principal payment and as for its rental payment will introduce the sharing ratio to represent the ownership of bank and customers in every periodic payments by using flexible sharing ratio. This modification does not include any increment in the repayment of principal and the profit gained is based solely on the payment of rent to purchase the ownership of the bank. Hence, this modified BBA is much more compliance towards Shariah law because it does not comprise any riba, gharar, or masyir.Bai Bithaman Ajil (BBA) instrument as the main mode of financing has become the biggest leap in the revolution of real estate purchase. Through many years of developing and refining its usage in financial institutions, BBA has confronted several argumentation and debate among scholars on its conformity towards Shariah. Although there are cases of inconsistency findings when it comes to conformity towards Shariah, BBA is still one of the predominant, accepted mode of financing especially in Malaysia. Therefore, this paper will prove that BBA instrument using the approach of Constant Rate of Return (CRR) is mathematically identical to the conventional approach which is annuity. Besides, this paper will also provide the amortization of CRR. It is proven that CRR formula is likely based on the amortization of conventional approach. Besides, this paper discusses mainly on the incompliance of BBA towards Shariah and hence will introduce the proxy for BBA instruments by implementing profit-loss sharing (PLS). Th...

Alternative profit rate shariah-compliant for islamic banking

Profit is the aims for Islamic banking and conventional banking. Determination of profit in Islamic banking in Malaysia depends on the profit rate, whereas profit rate is essentially from reference rate which is known as the base rate (BR). However, the determination of the components contained in the BR such as benchmark cost of funds and the statutory reserve requirement (SRR) is non-compliance with the Shariah because its directly proportional to the overnight policy rate (OPR). Therefore, an alternative formula for the profit rate are proposed which is known as the base profit rate (BPR). Construction of BPR formula is based on the principle that are more Shariah-compliant.

Rational Speculative Bubble Size in Gold, Hang Seng, S&P 500 and Nikkei 225 Index During Year 2008 to 2016

A rational speculative bubble is a surge in asset prices that exceed its intrinsic value. Rational speculative bubbles are among the ascription which may lead to the collapse of an economic system. Rational speculative bubble cannot be created but it comes into existence when assets started to be traded. Financial rational speculative bubble and burst have negative effect on the economy and markets. Financial rational speculative bubbles are difficult to detect. This study aims to shows the size of rational speculative bubble in four markets, which are gold, Hang Seng, S&P500 and Nikkei 225 during year 2008 to 2016. In this study, generalized Johansen-Ledoit-Sornette model are used to find the size of the rational speculative bubble. Bubble detection is important for both sides of macro-economic decision makers and to the trader. Especially for a trading system that requires detailed knowledge about the time and the stage of the bubble burst.

Empirical testing of robust optimization profit sharing ratio with straight line depreciation in Aitab instrument

An existing robust optimization of profit sharing ratio (PSR) model has been developed and applied into Islamic hire purchase instrument aims to provide fairer situation to all parties involved in Islamic hire purchase contract. Robust optimization of PSR is build based on profit loss sharing approach which highly recommended by Syaria’ to avoid riba and gharar transaction. However, an existing robust optimization of PSR does not consider straight line depreciation into consideration. Straight line depreciation is depletion of asset values constantly over its expected useful life. This matter exposed the lessor into void risk situation where the lessee does not fulfill the hire purchase contract. Thus, this research proposed a modified model for existing robust optimization of PSR with straight line depreciation parameter enhancement. This new modified robust optimization of PSR with straight line depreciation model comply Syaria’, better and more equitable compare to the existing model.