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Musharaka is about contributing capital to a company, project, or any kind of asset transaction. The profit and the losses needs to be shared.It is an agreement under which the islamic bank provides funds, which are mixed with the funds of the business enterprise and others. Generally agreed terms are that -
1) all partners must contribute capital to the partnership.
2)Contributions must be subject to profit sharing in any ratio agreed between the partners.
3)The partners losses are to be shared according to the financing share of each partner and may not be limited to the value of their capital contributions.
4) The partnership may be agreed for a set period of time or be indefinite. It can be established as permanent Musharaka in which invested funds are not subject to repayment in the short term, or as diminishing Musharaka where invested funds are repaid over time as profitability allows. Such divestment terms are agreed at the outset.
5)Partners must receive regular accounting and other information on business activity.
6)Permission from existing partners is required before raising capital from new partners.
7)Partners may negotiate fixed wages or salaries at the outset of the Musharaka. |
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