Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/236921 
Year of Publication: 
2018
Citation: 
[Journal:] ISRA International Journal of Islamic Finance [ISSN:] 2289-4365 [Volume:] 10 [Issue:] 1 [Publisher:] Emerald [Place:] Bingley [Year:] 2018 [Pages:] 85-93
Publisher: 
Emerald, Bingley
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 Shari?ah 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.
Subjects: 
American finance house LARIBA
Diminishing partnership
Home financing
Sale with exception
Usufruct
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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