Islamic banking musharakah mudarabah 14 musharakah

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Islamic Banking Musharakah & Mudarabah 14
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Musharakah Sharing of Profit & Loss Islamic Banking 15 Partner 1 Capital Expertise Partner 2 Capital Expertise Partner 3 Capital Expertise
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Musharakah is narrower than Shirkah Islamic Banking Musharakah & Mudarabah 16 Shirkah means ‘Sharing’ Shirkat - ul - Milk Joint ownership in property either by option or automatically Shirkat - ul - Aqd A partnership through a mutual contract Shirkat - ul - Amal Partners rendering services together Shirkat - ul - Wujooh Partners do not have any investment but buy on deferred price and sell at spot (Trading) Term ‘Musharakah’ is not found in Fiqh, it is a recent introduction and refers to Shirkat-ul-Amwal ’ only
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Basic Rules of Musharakah Distribution of Profit Profit distribution ratio must be agreed at the contract time. Cannot be lumpsum or fixed amount. Cannot be expressed as specific ratio tied with investment e.g., 15% of invested capital. The profit distribution ratio must be applied to the actual profit of the business. Islamic Banking Musharakah & Mudarabah 17
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Basic Rules of Musharakah Rate of Profit Is it necessary that profit ratio is determined on the basis of proportion of investment of partners? “Yes & Necessary” by Imam Shafi & Imam Malik “May Differ if partners freely consent to” by Imam Ahmed. “Sleeping partner cannot ask for more than his proportionate share in investment” by Imam Abu Hanifah Islamic Banking Musharakah & Mudarabah 18
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Basic Rules of Musharakah Loss Sharing All four imams agree that loss has to be shared in terms of the partners ratio of investment. Therefore, Profit can be shared as agreed but losses have to be borne in the proportion of their investment. Islamic Banking Musharakah & Mudarabah 19
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Basic Rules of Musharakah Nature of Capital Most jurists believe that capital to be pooled in monetary form and not in kind or comodities. Imam Malik: Can be done in kind however valuation at the date of contract must be done. Imam Abu Hanifah & Imam Ahmad: Cannot be done in kind because then the capital of one partner remains distinguishable from others which can create problems in redistribution of capital or in case of liquidation. Imam Shafi: In case the commodities are distinguishable (Dawat-ul-Qeemah) like a car, it cannot be done. But if the commodities can be replaced in quantity and quality (Dawat-ul-Amthal) like wheat, it can be done. Islamic Banking Musharakah & Mudarabah 20
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Basic Rules of Musharakah Management of Musharakah Every partner has a right to work for the business. However on mutual consent they can appoint any partner. Remember that a sleeping partner cannot share a profit in excess of the ratio of his investment.
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