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Islamic Financial
Products and Processes
Ameenullah Sheikh [email protected]
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MUSHARAKA – EquityFinancing-
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Musharaka - Illustration
Partner
Musharaka(Partnership)
6! "#nership $! "#nership
Partner
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Musharaka
• Musharaka literally means sharing
• Musharaka means a joint pool of funds formed for conducting some
business in which all partners share the profit according to an agreedratio while the loss is shared as per the ratio of investment
• All partners have a right to participate in the
management of the project. However, the partners also have a right to waive the right of management
in favor of any specified partner or person
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MUSHARAKAH
FROM HADITHS%
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• SHIRKAH
• SH&RKA'-U-M&K • SH&RKA'-U-A*
• SH&RKA'-
U-+U,H
• .A&R &KH'&AR&
(Man/at"ry)
• &KH'&AR&
(pti"na0)
• SH&RKA'-
U-AAMA
• SH&RKA'-
U-AM+A
• Shairkat-u0-Mu1a#a/a • Shirkat-u0-&nan
2ateg"ries "1 Shirkah
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MUSHARAKAH
It has been divided into two kinds:
SHIRKAT-UL-MILK
It means joint ownership of two or more persons in a particular
property without any commercial intention.
SHIRKAT-UL-AQD
oint venture of two or more persons in a particular property with
commercial intention.
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MUSHARAKAH
SHIRKAT-UL-MILK
'his kin/ "1 Shirkah 3ay c"3e in t" e4istence in t#"
/i11erent #ays%
A. Optional Shirkat-ul-Milk (Ikhtiari)
e5g5 A 7 8"int0y purchase a H"use
B5 Compulor! Shirkat-ul-Milk ("hair Ikhtiari)
e5g5 7 2 are the 8"int "#ners "1 inherite/ car
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MUSHARAKAH
SHIRKAT-UL-AQD
Shirkat-ul-A#$ i $i%i$&$ in to thr&& t!p&'
a. Shirkat-ul-Amal
. Shirkat-ul-Aamal
*. Shirkat-ul-+u,ooh
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MUSHARAKAH
SHIRKAT-UL- AM+AL
A partn&rhip in hi*h all th& partn&r in%&t om& *apital into
a *omm&r*ial %&ntur&.
or /ampl&'
A0 1 2 C op&n an automoil& horoom ith 3440444
*apital 5rom &a*h.
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MUSHARAKAH
SHIRKAT-UL- AAMAL
A partn&rhip in hi*h th&
partn&r ,ointl! $&*i$& to o55&r
om& &r%i*& to th&ir *utom&r.
or /ampl&'
A 2 1 op&n a HR *onultan*! 5irm
60 7 2 8 op&n a ri$al 9arlour :Sa In;
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MUSHARAKAH
SHIRKAT-UL- +U<OOH
+h&r& th& partn&r ha%& no in%&tm&nt at all0
th&! pur*ha& *ommo$iti& on $&5&rr&$ pri*&
! th&ir =oo$ill an$ &ll th&m on pot.
or /ampl&'
Ari5 Hai 2 <ahan=ir Si$$i#ui pur*ha& Ri*& 5rom th&
hol&al& mark&t on *r&$it an$ al& in Cli5ton on *ah.
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MUSHARAKAH
A00 the three are 1urther /i9i/e/ in t" t#" types%
1. SHIRKAT-UL- MUFAWADAH
2. SHIRKAT-UL- AINAN
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MUSHARAKAH
SHIRKAT-UL- MUFAWADAH
+here capita0: pr"1it: 0"ss an/ 3anage3ent areequa0 a3"ng the partners5
SHIRKAT-UL- AINAN
'he partners share capita0: 3anage3ent: pr"1it:
an/ risk in an agree/ pr"p"rti"n #hich 3ay n"t;e equa05
'his is the 3"st c"33"n type "1 Shirkah5
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Musharaka In Islamic Banks
- Illustration
&s0a3ic 7ank Partner
(cust"3er)
Musharaka
6! "#nership $! "#nership
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F"r3s "1 Musharaka #5r5t &s0a3ic 7anks
!he Islamic "anks are using Musharaka in two forms namely:
#ermanent Musharaka
$iminishing Musharaka
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F"r3s "1 Musharaka
Permanent Musharakais the c"n9enti"na0 1"r3
"1 partnership5
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F0"# "1 Musharaka transacti"n (F"r 7anks)
Muharaka 5inan*in=
%.!he bank issues Musharaka certificates to the
general public. #rofit sharing ratio is stated in
the certificates along with other terms and
conditions.&.'eneral public subscribe the Musharaka
certificate to earn halal return from their
investment.
(.)inancing obtained is invested in industrial
projects to generate funds and provide return
to the certificate holders.*.#rofit are accrued and received from projects.
+.haring of profits between bank and
certificate holders.
"ankInvestors
Project
#rofit accrued
ubscription of certificates
% &
(
++
*
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F"r3s "1 Musharaka
Diminihin= Muharaka
It is a form of partnership in which
one of the partners promises to buythe e-uity share of the other partner
gradually until the title to the e-uity
is completely transferred to him.
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• CUSTOMER
The Bank enters into a Musharakah !oint O"nershi#$a%reement "ith the &ustomer an' (oth o) them #a* theirres#e&ti+e shares to the se,,er o) the asset
.ustomer #a*s rent )or the use o) (anks share in the#ro#ert*
The &ustomer a##roa&hes the Bank "ith the re/uest)or Pro0e&t1Ma&hiner*1House )inan&in%
• BANK
• JointOwner ship
• Mushar
ak a
• Rent
Diminihin= Muharaka
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• CUSTOMER
• BANK
• JointOwner ship
• Mushar
ak a
• Gradual Transfer of Oners!i"
The +a,ue o) Bank2s share in Musharakah #ro#ert* is 'i+i'e'into units3 "hi&h it se,,s to the &ustomer O"nershi# o) theasset is %ra'ua,,* trans)erre' to the &ustomer u#on #a*mento) asset #ri&e
Units "i,, (e "orke' out (* 'i+i'in% Bank2s )inan&e' amount(* num(er o) months )or "hi&h )inan&e to (e a,,o"e'
With ea&h #ur&hase o) unit (* the &ustomer3 the Bank2sshare in the Musharakah #ro#ert* starts 'iminishin%3"hereas &ustomer2s share starts in&reasin%3&orres#on'in%,*
Fina,,*3 the &ustomer (e&omes the so,e o"ner o) the #ro#ert*a)ter ha+in% #ur&hase' a,, units )rom the Bank3 a,on% "ith
Diminihin= Muharaka
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7asic Ru0es
.a#ita,
In Musharaka, the capital should bespecific, eistent and under disposal.It is invalid to establish a Musharakaon non/eistent fund or debt.
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7asic Ru0es
9ro5it harin= ratio o5 l&&pin=
partn&r
!he ratio of sleeping partner in profit
should not eceed the ratio that his
investment bears to the total capital
of partnership.
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7asic Ru0es
i/ation o5 r&mun&ration
It is not permitted, in a Musharakacontract, to specify a fiedremuneration for a partner whocontributes in managing theMusharaka funds or provides some
form of other services, such asaccounting. However, it ispermissible to give him a greatershare of profit than he would receivesolely on the basis of his share in
the partnership capital.
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MUSHARAKAH
ILLUSTRATION
<5 &1 A an/ 7 enter int" a partnership an/ it is agree/
;et#een the3 that A sha00 ;e gi9en Rs5 <:=-
per 3"nth as his share in the pr"1it: an/ the rest
#i00 g" t" 7: the partnership is in9a0i/5
>5 Si3i0ar0y: i1 it is agree/ ;et#een the3 that A #i00
get <?! "1 his in9est3ent "1 pr"1it: the c"ntract is
9"i/5
. 'he c"rrect ;asis 1"r pr"1it /istri;uti"n #"u0/ ;e
an agree/ percentages "1 the actua0 pr"1it
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Any uesti"ns@@
'HAK BU