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.
References in periodicals archive ?
The workshop, which was attended by Dubai Chamber members, lawyers and legal professionals, investors, corporate counsels, investment advisors and bankers, shed light on the background and techniques involved in Mudaraba, Ijara, Istisna a and Musharaka as well as Sukuk transactions.
For many of the poor, a simple Murabaha financing to allow them to pay over time for an asset that they can use to generate income may be fairer, easier to understand and more in line with their needs than a venture capital-like Musharaka or Mudaraba product.
Dr Marzban said, "Options such as venture capital funds, angel investments, and crowdfunding, which all mainly target innovative high growth startups, are linked to the concepts of Musharaka and Mudaraba, and are close to the fundamental principles of Islamic finance through meeting a set of Shari'ah guidelines.
Eskan Bank's REIT will consist of two income-generating and unleveraged properties currently owned by Bahrain Property Musharaka Trust (BPMT) which was formed in May 2011, in collaboration with reputable institutional investors and high net worth individuals.
Given relatively lower rates, the managements focus remained on mobilizing short-term certificate of Musharaka.
Mudaraba / Musharaka Business allegedly cheated public at large and looted millions of rupees from innocent people fraudulently.
In a press statement, Naser Al-Arfaj said that the Musharaka (Participate) initiative was targeting youth with business ideas, enabling them to realize their dreams in making profits out of their creative effort.
The partnership's first initiative, part of a planned series of research projects, will be a study examining the risk-management challenges facing Islamic banks, with a particular focus on musharaka and mudaraba under the profit-and-loss-sharing system.
After a series of discussions with Al Baraka's executive management and research team, we recognise that the industry must address concerns that the majority of Islamic banking assets are debt-based and that the proportion of equity based investments (such as musharaka and mudaraba) does not form a significant portion of the Islamic investments portfolio," Mr Alawode added.
The two major profit-and-loss-sharing equity-based modes of financing in Islamic finance are Mudharaba and Musharaka.
Islamic banking therefore uses various principles recognised as Sharia compliant such as Ijara (leasing), Musharaka (partnership) and Wakala (agency agreement).
Summary: Islamic modes of financing like Murabaha, Musharaka, Mudaraba, Ijara, Salam, Istisna'a and other Islamic modes .