Shariah Compliance of Housing Finance Practices in Sri Lanka: A Review
DOI:
https://doi.org/10.33830/elqish.v6i1.14763.2026Keywords:
Housing finance, Diminishing Musharakah, AAOIFI Standards, Islamic financial institutionsAbstract
Housing finance is becoming a dynamic and useful financial tool for buying a residence. People usually take out a home loan or housing finance to buy a house, flat or plot of land for building, renovating or extending and repairing an existing house. The study aims to examine whether the practices of Islamic financial institutions are compliant with AAOIFI standards or not. This study employs a qualitative method, utilizing primary data sources, and selects two Islamic financial institutions as samples. Some specific aspects of the diminishing Musharakah contract, such as partnership, liabilities, sale, Ijara and promise were compared with AAOIFI standards. This study examined the housing finance services of a selected Islamic financial institution based on specific aspects of reducing Musharakah. Results revealed that the selected Islamic financial institutions are mostly compliant with AAOIFI standards. At the same time, some of the practices of housing finance that reduce Musharakah fail to comply with AAOFI standards, such as obligations & stand pointing promise on an Ijarah contract.
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