A ranking procedure of Murabahah applications using fuzzy inferior ratio with generalized fuzzy numbers

摘要

Murabahah is an Islamic financial tool of a purchase and a sale of an asset where the purchase price, selling price and profit margin must be clearly made transparent between the seller and the purchaser. The evaluation process for selecting successful credit worthy applicants is crucial to mitigating risks against probable payment default in the future where such risk can fall under a credit risk taxonomy. Payment default under Murabahah financing has become an increasing concern for Islamic banks due to the potential inability of the respective banks to impose additional charges post execution of Murabahah contract. Hence, an effective evaluation technique in minimizing the default risks is essential. The assessment of applications is usually made by human and subjective evaluation will be involved due to different and varying levels of knowledge, experience and confidence of the evaluators. This justifies a fuzzy method as a suitable approach to be adopted. In this paper, a Fuzzy Inferior Ratio (FIR) procedure using generalized fuzzy numbers is proposed to be used for such evaluation of Murabahah applications. The level of confidence of the evaluators shall be represented in the form of generalized fuzzy numbers, and the compromise solution by FIR will be offered. The existing FIR and the modified FIR are compared with and analyzed to determine consistency of the ranking of the applicants. The proposed method has an advantage over the original FIR as the former does incorporate the element of the confidence level of the decision makers in the calculation to determine the rank of the successful applicants whereas the latter may not.