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 ?
For example, Musharikah is used as joint enterprise in which all partners share the profit and loss of the venture (Usmani, 2002).
Standard Chartered Modaraba provided Certificate of Musharikah (COM) which is a low-risk Shariah-compliant deposit scheme.
Short-term Certificates of Musharikah (COMs) comprise the highest proportion in the funding mix and have increased notably since FY09.
Another possibility is to sign fresh contracts on the existing loans on the basis of Islamic modes of financing such as mudharaba, musharikah, leasing and so on, for the remaining period of the loan contract.
For example Islamic banks under Musharikah financing do participations with other businesses and customers.
For example, they offer Musharikah, Mudaribah, Diminishing Musharikah, Salam and Istesna for exceptional cases.
13 July 2010 - Pakistan's JCR-VIS said it set a D rating to the entity and privately placed musharikah term finance certificates (TFCs) of PKR800m (USD9.
JCR-VIS had downgraded the entity rating on BGM to BBB/A-3 and the rating on the privately placed musharikah TFCs to BBB+ with a "negative" outlook on 23 June 2010.
There are two specific terms that define profit and loss relationship between the borrowers and the lenders, Musharikah and Mudarabah.
Musharikah (equity participation or limited partnership) refers to a financial system in which profits and losses are shared by the borrowers and the lenders.
JCR-VIS had previously downgraded the entity rating of BGM to A-/A-2 from A/A-2 and the rating on the privately placed musharikah TFC to A from A+ on 3 November 2009 at the onset of the problems being currently faced by the modaraba.
In mid-1984 the central bank announced twelve "Islamic" modes of finance comprising mark-up, mark-down, buy-back, leasing, hire-purchase, development charge, musharikah, equity, participation term certificates, rent-sharing, qard al-hasan, and service charge.