Abstract

The development of Islamic financial system in Malaysia had lead to various innovation and establishment of new instruments and concepts whether in debt-based financing or equity-based financing. Though several concepts have been modified to fulfill consumer’s need, however, each and every one of the models should abide the law of Shariah. For over a few decades, Malaysia has been the lead country in applying the Bai Bithaman Ajil instrument in property financing. Until recently, a few legal cases have emerged and its compliancy towards Shariah has been debated among the scholars and consumers itself. In spite of the expose issues, a new proxy has been introduced. Musharakah Mutanaqisah is introduced as an equity-financing and is proven to be conforming towards Shariah as its ownership is shared between the bank and consumer. In contemplation of making the debt-based financing compliance towards Shariah, this journal is to schemed a new model in which the original model of Bai Bithaman Ajil is embedded with profit sharing ratio exist in Musharakah Mutanaqisah.