Conventional and Islamic Mortgage Financing: a Legal Comparison

Conventional and Islamic Mortgage Financing a Legal Comparison

Chapter One of Conventional and Islamic Mortgage Financing a Legal Comparison

INTRODUCTION

Mortgage financing otherwise known as Home Financing is a product through which people are made or become home owners. It is a practice that is widely or relatively embraced by financial institutions as well as the private individuals (group of people). It is a subtle scheme that guarantees convenient home ownership through loan agreement. But in the same vein, it is seen generally beyond this perspective; a financing scheme through which desired property is acquired via the repayment process, especially with the conventional banking system.

It should be noted that this financing scheme is conceived in many ways: It differs in operationalization with the conventional banking operator, the legal practitioner and the practitioners of the Islamic economic system cum the

(Shari‟ah) regulator. By and large, the converging point with all these practitioners is that Mortgage Financing is a method of acquiring legal or equitable property upon installmental repayment.

The Nigerian legal framework has thrived in the construction of provisions that regulate the operation of Conventional Mortgage Financing. This regulatory framework therefore enables the conventional mortgage financing, which is been executed by many finance institutions: Cooperative Societies; Commercial Banks; Mortgage Banks; Private Home Builders1, etc to secure patronage of customers.

The practice of Islamic Mortgage Financing in Nigeria is relatively at its nascent stage but, just like the Islamic Banking operation, it has not secured express approval of the government let alone expresses legal frameworks that will regulate its operation. If at all it has been operating, it is still through an informal process and with an intendment of guiding its operation with the relevant provisions of the Shari’ah. Though, one is yet to come into record, in case of dispute, it should be expected that the jurisdiction will bonafide lie with the Shari’ah Court2. From the foregoing notwithstanding, there are some

• This refers to those that engage in the building of estates for the members of the public.

• Shari’ah court has provision under the Nigerian 1999 Constitution of the Federal Republic of Nigeria, to hear and determine as of right matters relating to Islamic personal law. This

Shari’ah2this refers to those that engage in the building of estates for the members of the

public.

2 Shari’ah court has provision under the Nigerian 1999 Constitution of the Federal Republic of Nigeria ah-oriented commercial disputed therefore will come under this particular provision. specific areas of the legal framework dealing with transactions under which Islamic Mortgage Financing can be found fit and operational, within the entire laws guiding legitimate commercial transactions of all sorts. Thus, this research work is to examine by way of a comparative analysis how these two mortgage financing schemes operate under the related legal and regulatory frameworks, with a view to seeing the areas of similarities and disparities of these two financing schemes, within the purview of the laws.

This work is therefore divided into five chapters: the first chapter discusses the general background knowledge about what this long essay is addressing, including background of the study, literature review and definitions of terms among others. Chapter two examines the conceptual background of what is understood by Conventional mortgage financing and Islamic mortgage financing. Chapter three probes into the legal and regulatory frameworks guiding the operationalization of the two mortgage financial systems. Chapter four looks into the analysis of the legal frameworks. Conclusion, Summary and recommendation make the concluding chapter of this research work.

BACKGROUND OF THE STUDY

The quest to research into this topic was appropriate by my interest to look into the Islamic Financial System. I have being opportune to have a critical experience of how Nigerians and most importantly muslims live in their various habitat and likewise attended some few seminars and talk shows even though they are not reported and have concluded to help the Ummah in my little way. However, in proffering a solution to the low standard of living among the Muslims I have also decided to look into the legal means of getting a meaningful life at the same time a life that is not against the doctrines of Islam. Islamic Financing System which I know has helped a lot of Muslims outside Nigeria should also be introduced to bring an end to the low standard of living of most Muslims in this part of the world.

Subject to my interest in eradicating the problems of home ownership among the muslims this work was researched into so as to bring to the notice of those in need of home where and how they can go about the funding of their homes and the measures put down by the government to assist home ownership and to realize the dream of everybody to become an owner

OBJECTIVE OF THE STUDY

The major purpose of this research work is to do a legal comparism of Islamic and conventional mortgage financing and ways by which the lives of Muslims can be upgraded and how they can be landlords without transgressing the bounds of Allah. Also, this work intends to bring to the knowledge of muslims the varieties of private and public institutions [Islamic or contemporary] which can profer solutions to the problems facing the Ummah, that is, difficulties in accessing accommodation by the Muslims in Nigeria, which is evident in the light of their conditions of living.