Musharaka product (June’13)

Q. What is musharaka product (June’13)?

Musharaka product: Musharaka is a contract of partnership between two or more parties in which all the partners contribute capital, participate in the management, share the profit in proportion to their capital or as per pre-agreed ration and bear the loss, if any, in proportion to their capital/equity ratio.

In the Islamic Banking context, the Islamic Bank may be a partner with its client for running a business where both of them contribute capital, either both of them or the client alone take part in the management of business as per terms of the contract and share the profit as per agreed ration or bear the loss, if incurred, as per their capital/equity ratio.