Factors Influencing Customer's Choice of Islamic Home Financing in Pakistan

Abstract

The importance of spirit or "ruh" in a human's existence is contrary to the needs of  Maslow’s Theory of Human Motivation Islamic Financial Institutions (IFIs) have developed rapidly since 1982, with total IFI assets reported to be $200 billion in 2008 and $2 trillion dollars by 2014. Pakistan started incorporating .Islamic principles into its financial framework during the late 1970s, while global islamic finance liquidity agency formalized in 2010 for issuance of Shari'ah-compliant financial instruments. In 2002, Meezan Bank Limited (MBL) became the first Islamic commercial bank to provide Islamic banking services and products in Pakistan. In 2008, the MBL Home Easy program was announced, using Diminishing Musharakah agreements to finance purchases of homes. Pakistan faces an ever-increasing housing shortage, including an estimated backlog of 6 million units or 30 years, while 270,000 units are built annually in the economy, of which only 60,000 units are termed affordable SHG-assisted housing. It is a severe challenge in the county. Home finance options or resources seem rare and less than expected, as the mortgage‐to‐finance GDP ratio is at 0.25 percent. There are fundamental challenges that must be overcome to reform the process needed to stimulate the long-term growth of home finance. This article seeks to examine the role of religion, customer awareness, loan repayment, pricing of products and pricing safeguards for consumers acceptance, implementation and results of Diminishing Musharaka in Islamic finance. Understanding religion, customer awareness, loan repayment, pricing of products and customer protection measures are crucial in achieving the true understanding of the practical challenges and consequences of this form of finance. By examining these factors, the goal of this study is to ensure practical and beneficial concepts that are useful to assessing all surrounding factors in the religious beliefs, customer awareness, financing procedures, pricing of products, and customer protection measures of the Islamic finance jurisdiction. The study examines the effects of religion, customer awareness, pricing of products, protection of interest, and loan repayment on Diminishing Musharka House Finance in Pakistan. A total of 374 people completed a questionnaire survey from Banks and Development Financial Institutions (DFIs) in Khyber Pakhtunkhwa Province. The research tries to explore, analyze and understand what influence the customers have on the declining partnership model in islamic home financing