IMPACT OF KIBOR RATE

IMPACT OF KIBOR RATE, TAX RELEAXATION AND DEFAULT RISK ON BANKER’S ATTITUDE TOWARDS DIMINHSING MUSHARAKA ARRANGEMENT IN ISAMIC BANK OF PAKISAN
ABSTRACT
Aim of this study is to finding out effect of change in KIBOR and Tax regulation and default risk of loss on banker attitude toward DP. All Islamic bankers working in Lahore is target population. Convenience sampling is used for collecting date from bankers working in Islamic banks. 150 questionnaires were distributed but 55 were returned by bankers so response rate is 55%. Regression analysis is used for analysis the data collected by using 5 point Likert scale (1= Strongly Agree to 5=Strongly Disagree). Positive and significant effect is found of above three variables with banker attitude. Govt. can formulate tax regulation regarding property tax which can offer relaxation to customer so that Islamic bank can get capture more market share due to favorable tax policy. Furthermore, less KIBOR rate can be favorable for both bank and customer as both can afford it otherwise cost of sold will increase which make inconvenience for customers. Moreover, work could be conducted on IIBOR so that Islamic bank follows own rate instead of KIBOR.

Keyword: DM (Diminishing Musharaka), KIBOR (Karachi Inter Bank Offer Rate).

INTRODUCTION
KIBOR comprises on interest rate on which a bank lend money to another bank. It is set by State bank of Pakistan. All commercial banks in Pakistan follow this rate while charging interest to their customers. Islamic banks also follow this KIBOR rate. Many objects that it is permitted to set this rate for Islamic products but according to Muhammad Usman Taqi, it is permissible as one seller who sells permissible (Halal) products can set price in line with that seller who is selling wine (Haram). However, work is being conducted on IIBOR (Islamic Inter Bank Offer Rate). The tax is charged by the principal authority of the control in which the property is situated. Risk of loss defines who has to pay and who stands the risk if the goods/property are lost or destroyed without the mistake of either party. A lot of work has been done on diminishing partnership and its implementation issues but we are examining bankers’ attitude regarding three variables which can be improved if favorable policy is formulated by govt. In this way, Islamic banking which have started work on diminishing partnership and is also growing could be further developed by creating favorable environment so that focus from trade based transaction can convert into trade based transaction.

Purposes of this research paper is to finding out effects of above three variables with banker’s attitude in Pakistan context and recommend suggestion to control the KIBOR and tax rates associates with DP based products i.e. home financing.

Research Question
Q1. Does change in KIBOR effect to banker attitudes towards DM?
Q2. Does change in relaxation regulation effects to banker attitudes towards DM?
Q3. Does default risk effect to banker attitudes towards DM?
Research Objective
To determine the effect of change in KIBOR on banker attitudes towards DM.To determine the effect of change in tax relaxation on banker attitudes towards DM.
To determine the effect of default risk on banker attitudes towards DM.Hypothesis
H1: Change in KIBOR has significant positive association with banker attitude.

H2: Change in Tax regulation has significant positive association with banker attitude.

H5: Default risk has significant positive association with banker attitude.

Theoretical Framework
Change in KIBOR
Change in Tax regulation
Default risk
Banker attitude toward DP

LITERATURE REVIEW
Islamic modes of finance are categorized into equity or two groups namely participatory based modes consisted on mudarba, musharaka and sukuk and trade based modes consisted on salam, istisna and murabaha. Trade based modes are not actually loans, however, create debts on basis of deferred sales CITATION Usm l 1033 (Usmani, 1999).

According to book of Taqi Usmani, Musharaka is an Arabic word which literally meaning is sharing or Shirkah, however, in business context, it means a joint enterprise wherein all partners share profit and loss of joint venture. According to Islamic principle, a financier before lending money to debtor should decide either he want to lend on humanitarian basis wherein he can demand only principle amount or for purpose of share in his profit wherein he will have to share his loss also. It has been divided into two types: shirkat-ul-milk and shirkat-ul-aqad.

Diminishing Partnership (Musharaka Mutanaqisah)
Musharaka means partnership and Mutanaqisah means diminish, hence, it defined as diminishing partnership. Based on shirkah al-Malik, bank and client both participate in joint ownership of property wherein banks mostly holds 70-90% and remaining parts is hold by client. Bank having higher share in property leases his part to client on Ijara contract wherein rent is paid for agreed time period. In addition of rent, bank shares in units form are bought by client at specific time which enhance the client’s share and diminish the bank’s share in property and this begins the contract of sale (Al Bay). Rent is re-adjusted according to share and partnership dramatically reduced until client acquires all units of bank’s share and becomes the sole owner of the property. All amounts of units are received by bank to cover invested amount and rent is treated as profit of bank CITATION Bab17 l 1033 (Baber, 2017). Property jointly owned by bank and client is come under Shirkat al-Milk. Bank rents out its share to client and proposes to sell its share on a monthly basis which is bought by client through successive purchase contract. In case of default wherein rent is not paid due to inability, customer buys the bank portion CITATION Kas17 l 1033 (Kashi & Mohammad, 2017). Diminishing mushraka can be executed in two ways namely direct musharaka model wherein profit and share of bank in a periodical manner are paid till end of repayment period when client becomes solely owner of property and combination of musharaka and leasing agreement wherein duration of rent and payment are agreed and at last payment of rent, client become solely owner of the property. In Pakistan, rent or profit is assessed on KIBOR rate. Both methods are used to obtain fixed or varying rent income CITATION Din17 l 1033 (Dinc, 2017).

DP based on principal of profit and loss sharing rather than debt on which BBA is based. Bank not only takes ownership of property but also take responsibility of property until amount of financing is fully paid. Conversely, in Islamic based transaction, possession and liability of goods is not taken which must be taken before selling to the buyer. In Dp, customer is not indebted to the bank for a long period and rent instead of interest is used which eradicate the interest forbidden in islam. It is flexible contract as customer can get ownership of the house earlier by buying additional bank’ share. This minimizes the financing period CITATION Raz11 l 1033 (Razak ; Ismailb, 2011).
In DP, rent is linked with usufruct of the asset whereas interest charges are not link with the asset’s usufruct. Hence the rental rate can differ among houses within a same row of houses or among different floors within a condominium block. But interest rates are generally independent from such factors. Agreement is found among scholar that actual rental based on value of property for Musharaka Mutanaqisah can be used as benchmark in place of interest. According to Taqi ‘usmani (2004), at the time of contract, rent must be determined for entire period of lease. Different rent can be charged for different phases on the condition that amount of rent will be decided upon agreement of both parties. Lease will be not valid if rent for later phase is solely determined by lessor. Islamic banks are using LIBOR for rent rates in UK as scholars argued that it is not haram if rent is being set in line with market interest rates and it is allowed if Muslim shopkeeper charges same profit as set by non-Muslim deals in sale of alcohol (Yacuby, 1998). Shaikh Nizam and Usmani in 1998 conversed about difficulty to fit this analogy in practice of Musharaka as LIBOR led toward uncertainty regarding prices of rents and it’s difficult to determine future changes. Moreover, validity of lease is also dubious due to fixing of rent at later phase is determined by lessor without consultation with lessee. Asset valuation should be considered after sale of property wherein transfer of ownership is given to client. Otherwise, appreciation or depreciation of asset value will be on paper. However, like rent asset can be valued periodically on mutual agreement during contract tenor.

Issues regarding implementation of Diminishing MusharkaMydin Meera and Abdul Razak in 2009 discussed issues were mentioned regarding operation of MM. first is rent rate determined basis on market rental value which is determined by the location rather than market interest rate. Rent changes with the time which made difficult to convince the customer on higher rental so it’s make cumbersome to track the rental in many locations. Rent is determined basis on property price. Therefore, market interest rate is suggested i.e. LIBOR, BLR etc. as benchmark which make similar to MM as conventional financing. Second issue is tax regulations which should be amended as rental charges contributing to customer equity must not be taxable and rent charges contributing to profit of bank be treated as income of bank. Third issue is relating to land law which should be amended so that bank can become principal co-owner of properties. Fourth issues belongs to wear and tear, damages to property due to natural calamities, sell off property before fully owning and customer fail to make rental payment.

The house rent differs based on the location and time which places the customers into difficulties Tax should be charged from profit added on bank equity rather than profit added to customer share. Another issue is promise taken by client to buy the bank’s share dramatically until fully ownership of property. Islamic jurist have difference opines regarding fulfilling this promise is obligatory or recommended. In obligatory case, bank has legal right to impose fine on breaching of promise but in recommended case bank cannot impose fine rather customer has freedom to terminate or continue. Issue of property damage regarding MM occurs due to client’s negligence then client pay compensation. If damage occurs due to natural calamities then both parties will have to share the loss according to contributed proportion CITATION Osm10 l 1033 (Osmani ; Abdullah, 2010).

Qureshi and Hidayat in 2016 also discussed about following implementation issues regarding Musharaka:
Legal framework: there is no legal model that can be used as a reference for any legal case.

Repayment issue and default: Islamic banks are currently using two methods for recovery of money in case of default. In first method, banks sell property in market and remaining amount if not recovered then pressurize the customer for payment and in second method bank bear loss with customer if property is sold undervalued and does not consider recourse from customers.

BANKER ATTITUDE TOWARD DP HOME FINANCING
According to survey from bank officers, DP is more preferable to BBA because of compliant to shariah CITATION Smo07 l 1033 (Smolo, 2007). Banker agreed that ownership and possession of the house is taken which is real asset rather than exchanging money. Secondly, property is jointly owned by both bank and customer wherein equity is shared until the end of financing period. In DP, actual rental rate comprises on following factors: size of the house, locations and facilities surrounding house and customers also agreed that rental rate based on fairness. Moreover, customer can buy more bank share for getting property ownership early. Bankers also expressed that further study could be conducted to determine fair rental benchmark due to unique distinctiveness of each house CITATION Raz11 l 1033 (Razak ; Ismailb, 2011).
In interview with senior management and executive of different Islamic bank in Pakistan, results showed that 32% respondents said that willingness of Islamic banking is miss in the current practices of Islamic banks but 42% respondents criticized on the lack of appropriate and formal regulatory framework for the Islamic banks CITATION Lod l 1033 (Lodhi, Kalim, ; Iqbal, 2005). According to interview taken from employees of Islamic banks, Islamic banks follow the method of diminishing Musharakah for home financing and Musharakah model fully based on Shariah compliant and KIBOR is used for calculation of property’s rent. 70% respondent tries to differentiate the DM through religious association, however, difference lies in execution of product CITATION Ali15 l 1033 (Ali, kanwal, & Mahmood, 2015).
Bankers did not agree that equity based financing means profit sharing between bank and customer. According to researcher, this finding is due to prevailing practices of Islamic banks which do not adopt equity based financing. Some agreed that the equity-based financing concept in Mush?rakah Mutan?qi?ah is different from conventional home financing. Some agrees that if the pricing of equity-based financing is crystal cleared then it will be fairer for both the bank and the customer. While responding, bank recommended that if pricing in equity-based financing is become more competitive then it is more attractive for the customer. The respondents did not agree that the price determined through rental rate in Mush?rakah Mutan?qi?ah should be lesser than interest rate. According to researcher, this response is due to prevailing practice in Islamic banks which relies on the interest rate. respondents agree on Shar??ah compliant MM home financing owing to the actual purchase of property by the bank who also takes ownership risk which lead toward justice and equity in contract. According to respondent opinions, MM home financing reveals the true spirit of Islam in encouraging societal well-being CITATION Ari15 l 1033 (Ariffin, Kassim, & Razakc, 2015). Generally, banks agreed on the principle of profit and loss sharing element under equity-based financing that show the actual spirit of Islamic banking practices. conversely, the Islamic banks are reluctant to apply the true concept of equity financing owing to constraints namely high risk, legal issues, documentation issues and implementation difficulty in existing system CITATION Ari15 l 1033 (Ariffin, Kassim, & Razakc, 2015).

RESEARCH METHODOLOGY
Research Design
This study comprises on quantitative research design. In this type of research design, survey is conducted for gauging attitude of banker regarding DP.
Population
The population of the study is bankers working in banks in Pakistan.
Sample
The sample size is 550 bankers comprises on Islamic bankers. Convenience sampling technique is chosen by the researcher to collect the data from banking staff. Convenience sampling technique is a non-probability sampling technique where the subjects are selected based on their accessibility to the researcher (Cooper and Schindler, 2013).
The Instrument Employed
The instruments to measure the study variables were derived from published literatures. A structured questionnaire was employed to collect the data from the respondents. The structured questionnaire used in the study is dissected into two broad sections. The first section aims at grasping the demographic attributes of the participants. In this initial division of the questionnaire, respondents are requested to give answers to questions about their gender, age, and education, etc. The second more elaborate and vital segment in the context of the research problems investigated in this study focused on having an insight of the opinions of participants regarding less KIBOR rate, less risk of loss and relaxation in tax regulation and banker’s attitude. This section comprises 5-Likert scale statements.

Response Rate
Out of 550 questionnaires, 347 are returned by bankers.

QUALITATIVE ANAYSISGender
Frequency Percent Valid Percent Cumulative Percent
Valid female 1 1.8 1.8 1.8
male 55 98.2 98.2 100.0
Total 56 100.0 100.0 Only 01 female and 55 male respond to interview and questionnaires.Statistics
No Year served Income age
N Valid 56 56 56
Missing 0 0 0
Mean 6.45 42160.71 33.02
Std. Deviation 11.524 20673.898 9.323
Variance 132.797 427410064.935 86.927
Range 73 74000 51
Mean value of age, no. year served, gender and income are 33.02, 6.45, 42160.71 with standard deviation 9.323, 11.524 and 20673.898.

QUANTITATIVE ANALYSIS
RELIABILITY
KIBOR
Reliability Statistics
Cronbach’s Alpha N of Items
.666 7
Cronbach’s alpha is 0.666, which shows a high level of internal consistency of scale.
Tax Regulation
Reliability Statistics
Cronbach’s Alpha N of Items
.631 7
Cronbach’s alpha is 0.631, which shows a high level of internal consistency of scale.
Risk of Loss
Reliability Statistics
Cronbach’s Alpha N of Items
.660 9
Cronbach’s alpha is 0.660, which shows a high level of internal consistency of scale.
Banker Attitude toward DP
Reliability Statistics
Cronbach’s Alpha N of Items
.840 12
Cronbach’s alpha is 0.840, which shows a high level of internal consistency of scale.
NORMALITY
Tests of Normality
Kolmogorov-SmirnovaShapiro-WilkStatistic dfSig. Statistic dfSig.

KIBOR .134 56 .013 .981 56 .538
As per Shapiro-Wilk, significant Value is greater than 0.05 so it is normal.

Bell shape is representing to normality of data.

All values are placed near/close to line which represent that data is normal as values have not more distance with line.

Tests of Normality
Kolmogorov-SmirnovaShapiro-WilkStatistic dfSig. Statistic dfSig.

tax .102 56 .200* .969 56 .159
As per Shapiro-Wilk, significant value is greater than 0.05 so it is normal.

Bell shape is representing to normality of data.

All values are placed near/close to line which represent that data is normal as values have not more distance with line.

Tests of Normality
Kolmogorov-SmirnovaShapiro-WilkStatistic dfSig. Statistic dfSig.

riski.146 56 .004 .963 56 .080
a. Lilliefors Significance Correction
161925828675
Bell shape is representing to normality of data.

All values are placed near/close to line which represent that data is normal as values have not more distance with line.

Tests of Normality
Kolmogorov-SmirnovaShapiro-WilkStatistic dfSig. Statistic dfSig.

attitude .084 56 .200* .981 56 .521
*. This is a lower bound of the true significance.

a. Lilliefors Significance Correction

Bell shape is representing to normality of data.

All values are placed near/close to line which represent that data is normal as values have not more distance with line.

REGRESSION ANALYSIS
H1: Less KIBOR has significant positive association with banker attitude.

Model Summary
Model R R Square Adjusted R Square Std. Error of the Estimate
1 .474a .225 .211 .486
a. Predictors: (Constant), KIBOR
R value (0.474) denotes simple correlation which indicates a moderate degree of correlation. The R2 value represents total variation in the dependent variable, attitude, can be explained by the independent variable, less KIBOR rate. In this case, 47% can be explained.

ANOVAaModel Sum of Squares dfMean Square F Sig.

1 Regression 3.709 1 3.709 15.686 .000b
Residual 12.769 54 .236 Total 16.479 55 a. Dependent Variable: attitude
b. Predictors: (Constant), KIBOR
ANOVA reports how well the regression equation fits the data (i.e., predicts the dependent variable). Regression indicates the statistical significance of the regression model with help of significance value i.e. p ; 0.05, and it indicates that, overall, the regression model statistically significantly predicts the outcome variable (i.e., it is a good fit for the data).

CoefficientsaModel Unstandardized Coefficients Standardized Coefficients t Sig.

B Std. Error Beta 1 (Constant) 1.859 .238 7.828 .000
kibi.061 .015 .474 3.961 .000
a. Dependent Variable: attitude
It shows that positive (0.061) and significant change come in attitude due to less KIBOR rate.

H2: less Tax regulation has significant positive association with banker attitude.

Model Summary
Model R R Square Adjusted R Square Std. Error of the Estimate
1 .740a .547 .538 .372
a. Predictors: (Constant), tax
R value (0.740) denotes simple correlation which indicates a strong degree of correlation. The R2 value represents total variation in the dependent variable, attitude, can be explained by the independent variable, relaxation in tax regulation. In this case, 74% can be explained.

ANOVAaModel Sum of Squares dfMean Square F Sig.

1 Regression 9.012 1 9.012 65.172 .000b
Residual 7.467 54 .138 Total 16.479 55 a. Dependent Variable: attitude
b. Predictors: (Constant), tax
ANOVA reports how well the regression equation fits the data (i.e., predicts the dependent variable). Regression indicates the statistical significance of the regression model with help of significance value i.e. p ; 0.05, and it indicates that, overall, the regression model statistically significantly predicts the outcome variable (i.e., it is a good fit for the data).

Coefficients
Model Unstandardized Coefficients Standardized Coefficients t Sig.

B Std. Error Beta 1 (Constant) 1.061 .217 4.895 .000
tax .108 .013 .740 8.073 .000
a. Dependent Variable: attitude
It shows that positive (0.108) and significant change come in attitude due to tax relaxation .H3: less risk of loss has significant positive association with banker attitude.

Model Summary
Model R R Square Adjusted R Square Std. Error of the Estimate
1 .620a .385 .373 .433
a. Predictors: (Constant), Risk of loss
R value (0.620) denotes simple correlation which indicates a strong degree of correlation. The R2 value represents total variation in the dependent variable, attitude, can be explained by the independent variable, less risk of loss. In this case, 62% can be explained.

ANOVAaModel Sum of Squares dfMean Square F Sig.

1 Regression 6.342 1 6.342 33.787 .000b
Residual 10.137 54 .188 Total 16.479 55 a. Dependent Variable: attitude
b. Predictors: (Constant), riskiANOVA reports how well the regression equation fits the data (i.e., predicts the dependent variable). Regression indicates the statistical significance of the regression model with help of significance value i.e. p ; 0.05, and it indicates that, overall, the regression model statistically significantly predicts the outcome variable (i.e., it is a good fit for the data).

CoefficientsaModel Unstandardized Coefficients Standardized Coefficients t Sig.

B Std. Error Beta 1 (Constant) 1.330 .253 5.246 .000
riski.108 .018 .620 5.813 .000
a. Dependent Variable: attitude
It shows that positive (0.108) and significant change come in attitude due to less risk of loss .RESULT SUMMARY
Hypothesis 1 Accepted
Hypothesis 2 Accepted
Hypothesis 3 Accepted
DISCUSSION
Mostly respondent having average income i.e. 43000 and age i.e. 33 were male due to willingness, availability and majority of male staff.
H1: Change in KIBOR has significant positive association with banker attitude.

Mostly (45%) agreed that Change i.e. reduction in KIBOR effects to banker attitude as on high KIBOR rate, customers avoid to enter in DP based products which restrict bankers to get more market share in banking industry. Some (34%) disagreed from above as they thinks that increase in KIBOR also brought higher profit in scenario of increased money supply in which people can afford high prices of DM based products.

It shows that positive (0.061) and significant change come in attitude due to less KIBOR rate.

Regression test proves the positive and significant effect of less KIBOR on banker attitude as on higher KIBOR rate, customers avoid to enter in DP based products.

H2: Change in Tax regulation has significant positive association with banker attitude.

Change i.e. rebate policy in taxation regulation have positive impact on bankers attitude as mostly (54%) said that these rebates will help of Islamic banks in capturing more market share and encourage this product and banking system in world which also aid in achieving ultimate goal to implement pure Islamic banking system based on profit and loss principal. Some (7%) disagreed as they thought that tax regulation is separate thing which customer has to pay on purchased product.

It shows that positive (0.197) and significant change come in banker attitude due to less property tax regulation which is paid by customer on whom name legal property is signed. Relaxation in tax regulation aid in increasing the market share of DP based products sold by Islamic banks.
H5: Default risk of loss has significant positive association with banker attitude.

Mostly (49%) agreed that existence of default risk is main thing which stops to enter in this DM based contract. However, some (13%) disagreed on the plea that it is part of Islamic banking wherein effort is doing hard in product developments based on DM.

It shows that positive (0.67) and significant change come in attitude due to less risk. If risk of loss associates with DP based product is increase then bank avoids entering in this contract. For example, DP based home financing have not much risk except few i.e. balloon payment in which banker charges 3% extra amount of remaining bank units if customer wants to buy all banking share at a time. Earthquake is also estimated in different areas accordingly said product is offered in that area where likelihood of earthquake is minimum. Dual ownership also mitigate risk if property is damage then loss will be suffered by both parties.

IMPLICATION
Association of all above three variables with banker attitude in context of Pakistan could be useful as it add information about these in literature review.

Practically, govt. can make policy to control KIBOR rate as its high cost make difficult for Islamic bankers to set reasonable rice for customers. Govt. can work on property taxes which specially bought by customers from Islamic banks. Govt. can give rebates on property tax so that customer prefer Islamic product. In this way, Islamic banks can be encouraged in banking industry.
FUTURE RECOMMENDATION
Work could be conducted on property tax as bank transfers ownership title on customer name so that customer can pay property tax but rental income which bank receives due to ownership in property shares so accordingly bank should also pay half tax according to share in property. Burden of tax should not be totally transferred on customer. Tax should be divided according to customer and bank share. In this way, DP could be followed through proper Islamic principal of partnership. Work could be done on IBOR in place of KIBOR so that some who have confusion about it as it look like interest rate can be removed.

OTHER RECOMMENDATION
Practically, govt. can make policy to control KIBOR rate as its high cost make difficult for Islamic bankers to set reasonable price for customers. Govt. can work on property taxes which specially bought by customers from Islamic banks. Govt. can give rebates on property tax so that customer prefer Islamic product. In this way, Islamic banks can be encouraged in banking industry. Not only property taxes but on other products based on DM based principal should be encouraged by govt. through rebating policies so that Islamic banking system can fully compete with conventional banking system in banking industry.

Work could be conducted on property tax as bank transfers ownership title on customer name so that customer can pay property tax but rental income which bank receives due to ownership in property shares so accordingly bank should also pay half tax according to share in property. Burden of tax should not be totally transferred on customer. Tax should be divided according to customer and bank share. In this way, DP could be followed through proper Islamic principal of partnership.

Work could be done on IBOR in place of KIBOR so that some who have confusion about it as it look like interest rate can be removed.

LIMITATION OF THE STUDY
The limitation of the study is small sample of the study wherein focuses on three variable which could be extended on another variable i.e. IBOR. Further research studies may be conducted by incorporating other stakeholders i.e. customer.

CONCLUSION
Change in KIBOR and tax regulation and default risk have positive impact on Islamic banker attitude in Pakistan. Our government policy could incorporate policy in these area so that Islamic bank can introduce more product based on DP and can get more market share in banking industry.

REFERENCE
BIBLIOGRAPHY Ali, M. A., ; Hussain, T. (2017). Significance of musharaka in islamic banking. China-USA Business Review , 16, 41-53.

Arshad, N. C., ; Ismail, A. G. (2010). Shariah parameters for Musharakah Contract: A comment. International Journal of Business and Social Science , 1 (1).

Baber, H. (2017). A comparative study of Islamic housing finance models and issues. Qualitative Research in Financial Markets , 9 (2), 168-180.

Cooper, D., ; Schindler, P. (2013). Business Research Methods (12th ed.). McGraw-Hill Education.

Dinc, Y. (2017). A Suggestion on Mortgage Financing of Islamic Banks: Diminishing Musharakah. International Journal of Trade, Economics and Finance , 8 (1), 25-31.

Gafoor, A. (1996). Interest-free commercial banking.

Kashi, A., ; Mohammad, A. (2017). Does Musharakah Mutanaqisah converge with Bai Bithamin Ajil and conventional loans. International Journal of Law and Management , 59 (5), 740-755.

Mydin Meera, A. K., ; Abdul Razak , D. (2009). Home Financing through the Musharakah Mutanaqisah Contracts: Some Practical Issues. J.KAU: Islamic Economics , 22 (1), 3-27.

Osmani, N. M., ; Abdullah, M. (2010). Musharakah Mutanaqisah Home Financing: A Review of Literatures and Practices of Islamic Banks In Malaysia. International Review of Business Research Papers , 6 (2), 272-282.

Qureshi, F., ; Hidayat, S. E. (2016). Challenges in Implementing Musharakah Mutanaqisah Islamic Home Financing in Malaysia. Journal of Islamic Financial Studies , 2 (2), 46-54.

Rahman, A. A., ; Shifa Mohd Nor. (2016). Challenges of profit and loss sharing financing in Malaysian Islamic Banking. Malaysian Journal of Society and Space , 12 (2), 39-46.

Shaikh Nizam, Y., ; Usmani, M. T. (1998). Fatwa on usage of LIBOR as a benchmark.

Usmani, M. T. (2004). An Introduction of Islamic Finance.
Usmani, M. T. (1999). Islamic finance – New steps.

ANNEXURE
Position: ______________________________________
Qualification: ___________________________________________
No of Years Served in Banking Industry: _____________________
Kindly rate the following statements
Strongly Agree Agree Neither Agree Nor Disagree Disagree Strongly Disagree
1 2 3 4 5
Increase in KIBOR rate is helpful for selling DP based products.

Decrease in KIBOR rate is helpful for selling DP based products.

Rebate in taxes is helpful for banker to capture more market share of DP based Products.

Higher taxes does not effect on DP based Products offered by Islamic banks in banking industry.

Default risk is major reason to avoid DP based product.

Default risk does not matter in implementation/growth of DP based product.

Bankers’ attitudes towards DP home financing
The profit sharing concept in DP home financing is not similar to conventional home financing
Strongly Agree Agree Neither Agree Nor Disagree Disagree Strongly Disagree
1 2 3 4 5
The method of computing profit in DP home financing is not similar to conventional home financing
Strongly Agree Agree Neither Agree Nor Disagree Disagree Strongly Disagree
1 2 3 4 5
The pricing of DP home financing is not similar to conventional home as rental rates replace interest rates.

Strongly Agree Agree Neither Agree Nor Disagree Disagree Strongly Disagree
1 2 3 4 5
The pricing of DP home financing is fair because it is based on rental value of property
Strongly Agree Agree Neither Agree Nor Disagree Disagree Strongly Disagree
1 2 3 4 5
The price using rental rate in DP is lower than interest rate
Strongly Agree Agree Neither Agree Nor Disagree Disagree Strongly Disagree
1 2 3 4 5
DP home financing is Shariah compliant because there is real purchase of property and bank takes ownership risk
Strongly Agree Agree Neither Agree Nor Disagree Disagree Strongly Disagree
1 2 3 4 5
The bank takes liability on the defects of house in DP financing
Strongly Agree Agree Neither Agree Nor Disagree Disagree Strongly Disagree
1 2 3 4 5
DP home financing product is based on justice and equality
Strongly Agree Agree Neither Agree Nor Disagree Disagree Strongly Disagree
1 2 3 4 5
DP home financing does not cause hardship and harm to individual
Strongly Agree Agree Neither Agree Nor Disagree Disagree Strongly Disagree
1 2 3 4 5
There is no need to pay the bank rental if the house is abandoned and not completed.
Strongly Agree Agree Neither Agree Nor Disagree Disagree Strongly Disagree
1 2 3 4 5
The bank can easily assist during financial difficulties under DP financing
Strongly Agree Agree Neither Agree Nor Disagree Disagree Strongly Disagree
1 2 3 4 5
DP home financing reflects the true spirit of Islam in promoting the well being of society
Strongly Agree Agree Neither Agree Nor Disagree Disagree Strongly Disagree
1 2 3 4 5
DP home financing contributes positively to the equitable distribution of wealth and income
Strongly Agree Agree Neither Agree Nor Disagree Disagree Strongly Disagree
1 2 3 4 5
Usury (riba) does not exist in DP home financing
Strongly Agree Agree Neither Agree Nor Disagree Disagree Strongly Disagree
1 2 3 4 5
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