Application of the Musharakah Mutanaqisah Principle in Community-Based Housing Financing: A Shariah-Compliant Approach to Affordable and Inclusive Housing

The issue of housing affordability remains a significant challenge for low- and middle-income communities, particularly within conventional mortgage systems that rely on interest-based financing. This research explores the application of the Musharakah Mutanaqisah (MMQ) principle as a Shariah-compliant alternative for community-based housing financing. The study aims to examine how MMQ can provide affordable, inclusive, and equitable housing solutions while promoting social justice and community empowerment. Employing a qualitative approach, the research draws on literature analysis, case study reviews, and comparative examination of existing models of Islamic housing finance. The findings indicate that MMQ offers substantial benefits by eliminating riba (interest), enhancing affordability, and fostering shared responsibility between financiers and community members. Moreover, the model encourages community participation and strengthens collective resilience in housing development. However, the research also identifies key challenges, including legal and operational complexities, risk-sharing concerns, regulatory barriers, and limited stakeholder awareness. This study contributes theoretically by expanding the discourse on Islamic finance and housing studies, situating MMQ not only as a financial innovation but also as a tool for sustainable community development. Practically, it offers valuable insights for policymakers, Islamic financial institutions, housing cooperatives, and community organizations in designing housing finance models that are both Shariah-compliant and socially inclusive. Ultimately, the application of MMQ demonstrates strong potential to bridge the gap between financial justice and social welfare, making it a promising mechanism for sustainable housing solutions.