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Fundamentals of Islamic Finance and Banking
book

Fundamentals of Islamic Finance and Banking

by Syeda Fahmida Habib
August 2018
Beginner content levelBeginner
312 pages
10h 32m
English
Wiley
Content preview from Fundamentals of Islamic Finance and Banking

CHAPTER 6Musharaka

INTRODUCTION TO MUSHARAKA

The term Musharaka is derived from the Arabic word Shirkah, and means partnership. Musharaka is a partnership of two or more, who put together their capital and labour based on mutual trust, share in the profit and loss of the joint venture and have similar rights and liabilities. It is the purest form of Islamic finance instrument. In Musharaka the risks and profit or loss are distributed more equitably between the investors, determined by the proportion of the investment of each partner, rather than in a conventional interest-based loan where interest is calculated based on the principal amount, the interest rate applied and the period of the loan, without any link to the risk or profit–loss scenario of the venture.

From the Shariah perspective, Musharaka is a simple partnership. But designing a banking product from it is not easy. Banks prefer to enter into a partnership for a limited period only. Yet Musharaka is considered the most viable Islamic banking product, ...

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Publisher Resources

ISBN: 9781119371007