What developer would not want a loan that can help it complete projects on time, especially if the plan doesn’t involve any interest rate, just a profit sharing scheme?

That is why Mutiara Goodyear Development Bhd (MGD) just couldn’t say no to AffinIslamic Bank Bhd (AIB) when the latter came up with the country’s first hybrid Musharakah financing agreement to support its proposed high-end residential project on an 8.8- acre site in Bukit Gambir, Penang.

Buyers too might find it difficult to say no, especially since the financial plan means they have the added assurance of receiving the keys to their units on time.

The RM180 million venture that will comprise luxury condominiums, terrace houses and semidetached duplex units will be developed in “partnership”, or Musharakah, by both groups.

“It gives developers the assurance that we will support them all the way,” said AIB chief executive officer Kamarul Ariffin Mohd Jamil.

He explained that there are four facets of the AIB-MGD agreement: Musharakah (partnership), Murabahah (sale-based financing), Istisna’ (bridging financing) and Musharakah Mutanaqisah (diminishing partnership).

With Musharakah, considered the purest form of Islamic equity financing, all partners are entitled to a share of the earnings from a project according to a mutually agreed ratio, while with Murabahah, asset purchase can be made without incurring interest-bearing loans.

For Istisna’, it is defined as acquisition where the price is paid in advance, or progressively, in accordance with the progress of a job, whereas Musharakah Mutaniqisah involves equity participation and sharing on a pro-rata basis, where the bank keeps reducing its equity by transferring ownership of the assets to the participants.

MGD chief executive officer Kee Cheng Teik said the agreement is the first of its kind for the company.

“The scheme is unique because it includes a Musharakah joint-venture, which entails equity participation as well … this gives us the assurance our banker views itself as a long-term partner rather than just a lender,” he said.

AIB’s Kamarul said the plan is also suitable for the Build-Then-Sell (BTS) method of housing delivery.

“There’s a good chance Islamic financing can suit a BTS project as it is flexible and diversified … however, the risks involved have to be weighed first.”

Kee said MGD has not decided if it would implement the BTS system for its Bukit Gambir project, but that the application for the project has been submitted and completion is expected by 2011.