between the bank and the customer.
This targets both non-Muslims and Muslim homeowners who are looking to refinance their properties and first-time homeowners of completed properties.
"The Islamic banking industry in Malaysia is experiencing robust and dynamic growth. However, to make Malaysia a global Islamic hub, it is essential that we launch new innovative products that are aligned to globally accepted Islamic principles," says Piyush Gupta, Citigroup country officer and chief executive officer of Citibank Berhad.
A key feature of the Citibank Home Partner-i is that unlike most Islamic home loans, it is based on a floating rate with the added protection of a rate cap. This means, customers will enjoy savings benefits when the floating rate is low, but in the event it rises, the customer is protected by the capped rate. Obviously, if the floating rate rises beyond the capped rate, the customers' monthly payments will still be calculated based on the capped rate.
Additional benefits of this home financing facility include a "Payment Holiday" for qualified customers. Based on the compassionate Sharia code of ethics, there is no interest for late payments unlike conventional loans and the Takaful coverage offers annual profit distribution should there be "no claims" made during the insured period. And as a special incentive on Islamic banking products as announced in the 2006/2007 National Budget, there will also be a 20% reduction on stamp duty.
"The concept of 'diminishing Musyarakah' or diminishing balance co-ownership contract makes this home financing product very attractive. How it works is Citibank and the customer enter into a financial contract to share the benefits of a financed property. Citibank will lease its share of the
property to the customer. The customer then makes periodic payments, which comprise rental payment for the part of the property owned by Citibank and a buy-out of that part of the property. Once payments have been completed, the customer owns the property and the contract is terminated," explains the Rafe Haneef, head of Islamic Banking for Citigroup Malaysia.
He added that the diminishing Musyarakah concept is unlike conventional home financing that is based on a pure lending arrangement to purchase property, and different from the prevailing Islamic financing products that offer fixed rates without any flexibility.
"This is a product based on Islamic finance that offers real benefits to meet the needs of customers who are looking for both security and savings from their home financing. Customers generally select products based on their needs whether its service, product features or the savings they can enjoy. Citibank Home Partner-i has been designed based on the understanding of such needs and will be of interest to all Malaysians," says Rafe.
Citigroup recently made Kuala Lumpur the hub for its Islamic Banking business in Asia. The Malaysian capital is also being used to further strengthen Citigroup's Islamic banking franchise in the Asia-Pacific region.
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