A NEW DIMENSION OF PROFIT-SHARING RATIO DETERMINATION OF AITAB CONTRACT MATHEMATICAL MODELLING USING STOCHASTIC OPTIMISATION APPROACH

Abstract

This paper discusses the problem of determining the profit-sharing ratio for Islamic hire purchase contract named A/-ljara Thumma Al-Bai' or AITAB. AITAB originated from and is widely used in Malaysia. This paper presents an approach which maximises the profits of the participating parties in the hire-purchase instrument by implementing the fair profit-sharing ratio determination. First, the AITAB agreement is discussed followed by the mathematical formulation of the proposed profit-sharing ratio (PSR) determination using stochastic programming. The result of this study is the mathematical formulation of PSR for the AITAB contract which is more appropriate and Shari'ah compliant if compared to the formulation currently used.