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Musharika

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Musharika
A partnership in Islamic finance in which all partners contribute capital. For example, if Joe wants to start a business, he may form a musharika into which he places $20,000. A bank may then contribute $40,000 and split profits with Joe based upon some agreed-upon formula.

Musharikas are important in Islamic finance in part because they are the most straightforward. That is, a musharika does not attempt to imitate a debt product, which is controversial. Rather, it simply involves equity financing by an investor. However, musharikas are difficult to structure in some non-Muslim countries, especially the United States, because some banks are not permitted to make equity financing arrangements.


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In the last year or so we have introduced Sharia-compliant microfinance, both murabaha [microcredit] and musharika, [comparable to short-term joint-venture financing].
However, to some of us, it will be doubtful Islamic transaction where a musharika finance does not share in the loss of their partners.
Prospects for Future - Musharika Certificates While we hope that the Ministry of Finance will solve the remaining tax problems of the Modarabas, we are making all efforts for obtaining finalization of the Musharika Certificate Scheme which will remove the resource constraint of this sector.
 
 
 
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