Annuity method for revenue recognition in murabahah financing

Abstract

Purpose This study aims to: (1) examine stakeholders’ perspectives on murabahah financing and annuity-based revenue recognition; (2) analyze Islamic banks’ growth before and after the issuance of Fatwa No. 84/DSN-MUI/XII/2012; and (3) assess the maslahah underpinning murabahah financing and the annuity method using Ibn Ashur’s framework. Design/methodology/approach Using a qualitative approach, this study collected primary data through in-depth interviews with Islamic banking practitioners, customers and regulatory experts, supplemented by secondary data. The data were analyzed using descriptive and critical-reflective methods, guided by Ibn Ashur’s maslahah framework, which emphasizes ethical, rational and societal welfare. Findings The findings reveal divergent stakeholder views on both murabahah financing and the annuity method. The new fatwa enforces the annuity method, which has not demonstrably contributed to Islamic banks’ assets growth or market share by replacing murabahah with musyarakah. From the perspective of maslahah: dharuriyyah (essential) maslahah potentially becomes mafsadah (harm); individual and collective financial needs are marginalized towards Islamic bank’s institutional benefit; and zanniyyah (probable but rationally evident) maslahah potentially becomes wahmiyyah (illusory or imagined). Practical implications This study uses Ibn Ashur’s notion of maslahah to better capture complex socio-ethical dimensions. It questions the appropriateness of the annuity method within Islamic finance from a maslahah-driven ethical standpoint. Originality/value This pioneering study applies Ibn Ashur’s ethical-legal theory of maslahah to empirically assess murabahah financing and the annuity method. It offers critical insights into their practical utility and alignment with the higher objectives (maqasid) of Shariah.

The authors' abstract, as published at the source. Journal of Islamic accounting and business research, 2026 · DOI ↗