Diminishing participation between AAOIFI standards and Shariah standards of the Central Bank of Malaysia (its foundation and Exegesis)

Abstract

The diminishing partnership (al-mushārakah al-mutanāqiṣah) is defined as a new transaction that includes a partnership between two parties in a project with income, in which one undertakes to gradually buy the share of the other party. The importance of this transaction lies in the lack of clarity in its jurisprudential adaptation, so does it look like the partnership of ownership (Sharikat al-Milk) or the contractual partnership (Sharikat al-'Aqd), or is it taken from each of them by one party or is it an innovative contract. However, since the effects resulting from this contract differ according to its adaptation, it is vital to reconsider the derivation and rooting of the opinions of contemporary jurists, and to compare between the standards of (AAOIFI) and the Shari'ah standards of the Bank Negara Malaysia (BNM) in order to find out the most appropriate adaptation, and to note the consequences of that adaptation. The researcher will adopt the comparative, analytical, and inductive approaches. The research concluded that the diminishing partnership is a partnership between the partnership of ownership and the contractual partnership. Therefore, what was the purpose and basis of it is acquisition of assets like ownership and personal use, then this would be considered a partnership of ownership, even if this ownership results in profit and growth of money. On the other hand, if the purpose of establishing this partnership is trading in money, investment and profit, then this would be considered a contractual partnership, which is the opinion of al-Othmani and Bank Negara Malaysia. This classification results in several matters, including: the proceeds of the joint funds being divided in the partnership of ownership among the owners in proportion to their shares, while in the contractual partnership, the profit is according to what was agreed upon by the two contracting parties. Also, a partner in the contractual partnership may not lease his share, unlike the partnership of ownership, where he may do so. The researchers recommend examining the rest of the Shari'ah standards of Bank Negara Malaysia due to their great importance.