Abstract
Most of the Islamic banks operating in Pakistan offer Musharakah based products which are identical with the conventional mortgage products. Islamic banks adopt the model of Diminishing Musharakah (DM) for their home financing in which ownership of the bank decreases and transfers to the user after every successive payment. Islamic banks to calculate their profit uses the prevailing interest rate i.e. KIBOR (Karachi Inter Bank Offering Rate) just like conventional banks. The concept of Musharakah is to share profit and loss actually incurred out of the mutual investment rather than fixing the profits and to impose the fixed guaranteed returns to be paid by one party. This study will diagnose and highlight the problems and issues in the existing practices of Diminishing Musharakah based home financing products through conducting interviews from the bankers and will contribute through proposing an alternative layout of the Diminishing Musharakah that will address the problems of the existing practiced model. The qualitative approach will be followed and the Thematic Analysis will be applied to conclude the interviews.