SHARI’AH PARAMETERS OF MUSHARAKAH MUTANAQISAH IN ISLAMIC FINANCE: THE EXPERIENCE OF AUSTRALIAN INSTITUTIONS OFFERING ISLAMIC FINANCIAL SERVICES

The paper’s purpose is threefold: (1) probing what makes Islamic financing so important for the largest Muslim minority in a highly diversified multicultural Australia, (2) realising musharakah mutanaqisah (MM) as the real alternative for interest-based conventional finance and (3) evaluating the practice of MM by Australian Institutions offering Islamic Financial Services (AIIFS) from Islamic legal perspectives. By comparing the two systems – Islamic and conventional finance – the study finds that the latter is exploitative and thus creates conflict, stress and insecurity, while contributing to greater disparities of income and wealth. The practice of Islamic finance, on the other hand, is found to reduce conflict, stress and insecurity and make for a more harmonious and equitable society. In this context, the paper recommends that the regulatory impediments are removed to facilitate AIIFS to provide greater security, liquidity and diversity in order to meet the demand of investors in the Muslim community in Australia.