Diminishing Musharakah & EasyHome June 11-07

Diminishing Musharakah & EasyHome June 11-07 - Presentation...

Info iconThis preview shows pages 1–5. Sign up to view the full content.

View Full Document Right Arrow Icon
1 Concept of Diminishing Musharakah • Diminishing Musharakah - Introduction • Basic Structure • Shariah Principles • Illustration Presentation Outline Diminishing Musharakah-Introduction Musharakah is a form of partnership (Shirkat) There are two types of Shirkah: 1. Shirkat-ul-Milk Joint ownership of two or more persons in a particular property 2. Shirkat-ul-Aqd A partnership affected by mutual contract. It can also be translated as a joint commercial enterprise Musharakah
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
2 • In Diminishing Musharakah the financier and the client participate either in joint ownership of – a property or an equipment, or in a joint commercial enterprise • The share of the financier will be divided into a number of units • The client will purchase these units one by one periodically until he is the sole owner of the property Diminishing Musharakah- However generally Diminishing Musharakah is used in cases of Shirkat-ul-Milk It involves taking share in the ownership of a specific asset and then gradually transferring complete ownership to the other partner. This concept is based on Declining ownership of the financier Three components ü Joint ownership of the Bank and customer ü Customer as a lessee uses the share of the bank ü Redemption of the share of the Bank by the customer Diminishing Musharakah- Mode of Fixed Asset Financing Diminishing Musharakah is commonly used for the purpose of financing of fixed assets by various Islamic banks. ü House financing ü Car Financing ü Plant and machinery financing ü All other fixed Assets Diminishing Musharakah- Concept of Musha Musha means undivided ownership of the asset Lease of Musha It is allowed to lease Musha to other joint owner . Diminishing Musharakah-
Background image of page 2
3 Basic Structure CUSTOMER The Bank enters into a Musharakah (Joint Ownership) agreement with the customer and both of them pay their respective shares to the seller of the asset. Customer pays rent for the use of banks share in the property The customer approaches the Bank with the request for Project/Machinery/House financing BANK Joint Ownership Musharaka Rent CUSTOMER The Bank enters into a Musharakah (Joint Ownership) agreement with the customer and both of them pay their respective shares to the seller of the asset. Ownership of the asset is gradually transferred to the customer upon payment of asset price. (with the help of a Sale transaction between bank & customer at the end of each period) Customer pays rent for the use of banks share in the property BANK Joint Ownership Musharaka Gradual Transfer of Ownership The customer approaches the Bank with the request for Project/Machinery financing Shariah Principles
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
4 • To create joint ownership in property is called is Shirkat-ul-Milk and is expressly allowed by all schools of Islamic Jurisprudence. • All Muslim Jurists agree on the permissibility of the
Background image of page 4
Image of page 5
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 04/21/2011 for the course ISLAMIC BA 10010 taught by Professor Shamim during the Spring '11 term at Karachi Institute of Economics & Technology.

Page1 / 15

Diminishing Musharakah & EasyHome June 11-07 - Presentation...

This preview shows document pages 1 - 5. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online