Alternative Financing Models for Sustainable Housing Finance System: Some Proposals for Participation Banks in Turkey

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Title

Alternative Financing Models for Sustainable Housing Finance System: Some Proposals for Participation Banks in Turkey

Author

ÇETİN, Ali Cüneyt
ADIGÜZEL, Orhan

Abstract

This study examines some alternative financing models for sustainable housing development. As alternatives to conventional interest-based home financing modes, several financing models are currently in existence, the dominant among which are the cost plus sale (buyand- sell principle) and the diminishing partnership and lease contracts. In this study, the alternative financing models compare to the conventional financing (interest-based) system using illustration from banking practices. The paper examines the differences between the two and goes on to discuss specific problems of housing finance. In relation to the alternative financing models, the paper concludes that the diminishing partnership and lease contracts have several advantages over the cost plus sale for the customer. When implemented through Turkish participation banks and cooperatives, the diminishing partnership can provide an investment avenue for members through the fractional reserve money creation process. Consequently, if alternative housing financing models are adopted worldwide, sustainable housing finance system might be more stable and fair.

Keywords

Conference or Workshop Item
PeerReviewed

Date

2010-06

Extent

175

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