1. definition
Wikipedia- is an agreement between two or more partners, whereby each
partner provide funds to be used in a venture.
Investopedia- is a joint enterprise or partnership structure with profit/loss
sharing implications that is used in islamic finance instead of interest-bearing
loans.
Businessdictionary- is islamic principle that is applied to joint ventures where
interest is not charged by the creditor of the loan,instead an agreement is
made between the creditor and the buyer as to share the creditor will get
from the profit made from the venture

2. Musyarakah financing
Shirkat
(partnership)
Shirkat ul-milk Shirkat ul uqud
(holding (contractual
partnership) partnership)
Inheritance(faraid)
Al-mudarabah Shirkat-ul- Shirkat-ul-wujuuh
Wills (wasiyat)
(trustee amal(abdan) (receivable
partnership) (partnership in work) partnership)
Shirkat-ul-amwal
(partnership in
capital)
Shirkat ul mufawada Shirkat ul inan
equal shares) (unequal shares)

3. Advantages of musyarakah
1. Easy to 2. Best use of
establish 3. flexibility
resources
4. Cost effective 5. Combination of 6.Ability to rise
skills funds
7. Effective
decision making 8. Risk transfer 9. Mutual decision

4. disadvantages
1. Joint and several 3. Conflicts in decision
2. Conflict of profits
liabilities of partners makings
5. Limit the extent of the 6. Dependence of
4. Death partner
company decision
9. Inexperienced
7. Unlimited liability 8. Handling
management

5. Types of partners
Active Dormant Nominal Minor as a
partners partners partners partners
Sleeping/sile Retiring
nt partners partners
12 Types of
partners
Salaried
New partners
partners
Major Senior Quasi
partners partners partners

6. Power and rights of partners
1. Sell the mutually owned the property since all partners are
representing each other in shirkah and have the rights to buy&sell for
business purposes
2. Buy raw material on cash or credit using funds belonging to shirkah put
into business
3. Hire people to carry out business if needed
4. Deposit money & goods of business as depositor trust where and when
necessary
5. Use shirkah’s fund or goods in mudharabah
6. Giving shirkah’s fund as hiba(gift) or loan.
pillars of musyarakah
 contract (agreement-gabul) also called sighah
Two parties to the contract(‘aqidani)-acquire skills to do the management of
property
Object aqad also called ma’qudalaihi( letter agreement) capital or employment.

7. Rules of distribution the profits
The ratio of profit each partner must be determined in proportion to
the actual profit accrued to the business and not in proportion to the
capital invested by him.
Not allowed to fix a lump sum amount for anyone of the partners or
any rate of profit tied up with his investment.
If both partners agree that each will get percentage of profit based on
his capital percentages, whether both work or not, it is allowed.
Allowed that if an inventor is working, his profit share (%) could be
more than his capital base (%) irrespective whether the other partner is
working or not.
Partner has put an express condition in the agreement he will not
work for the musyarakah and will remain a sleeping partner throughout
the term of musyarakah, then his share of profit cannot more than the
ratio of his investment
Allowed that if partner is not working, his profit share can be
established as less than his capital assets.
If both are working partners, the share of profit can differ from the
ratio of investment.

8. Rules of distribution the loss
‘loss is distributed exactly according to the ratio of investment and the profit is
divided according to the agreement of the partner’
Basic rules of musyarakah
Quantified ( ma’loom) : how much
Specified (muta’ayaian) : specified currency
Not necessarily be merged : the mixing of capital is not required
Not necessarily be in liquid form: capital share may be contributed either in
cash/liquid or in the form of commodoties.

9. Musyarakah mutanaqisah
Customer share Bank share
capital capital Reduce bank’s
$10 000 $90 00 shareholding
10% 90%
MUSYARAKAH
Increase
MUTANAQISAH
customer’s
PARTNERSHIP(MMP)
shareholding
The MMP invests the $10
Customer-10&
000 capital in the Al-ijarah
Profits-50%
rental business
Bank-90%
Profit-$450
Monthly ijarah Actual rental
house payment value $500
Customer
$800 Share purchase
share purchase
$300