PEMBIAYAAN EKUITI MUSYARAKAH MUTANAQISAH (MMQ): PERUBAHAN DARIPADA AL-BAI’ BITHAMAN AJIL (BBA) BERASASKAN PENGALAMAN TERAS DARA CONSORTIUM (TDC)

Introduction - Islamic banking system is a system which emphasises equity based on profit loss sharing. Unfortunately, current banking practice offers mostly product based on debt financing which resembles the conventional banking system. Thus Islamic banking should introduce more products based on equity financing. A possible method can be applied is by tranferring debt-based financing into equity-based financing. Purpose - This paper examines the possibility of transforming debt-based financing of al-Bay’ Bithaman Ajil (BBA) into equity-based financing Musyarakah Mutanaqisah (MMQ) with special reference to the experience of Teras DARA Consortium (TDC) and further explores its impact on social welfare. Methodology - The study is theoretical in nature without emperical modelling analysis. Analysis will first be done theoritically based on the concept of leasing from BBA into MMQ. Transformation should be done on BBA due to the reason that BBA is the most popular product off ered by Islamic institutions in Malaysia. The experience of Teras Dara Consortium (TDC) will be reffered to examine the feasibility of this excercise. Findings - Theoretically, BBA financing can be extended or modifi ed into MMQ financing. Furthermore, TDC’s experiences showed that MMQ equity based financing can be successfully implemented and contribute to faster sales performances, increases the number of lower income participants, maintain profit gains, and enhance banking role in increasing social welfare benefits. Originality/Value - The paper explores and shows the possible actions taken by the Islamic institutions for promoting equity and the real spirit of Islamic banking. It further addresses the implications of these actions to the financial institutions vis–a–vis the society.