Musharkah

Musharakah means "a joint enterprise formed for conducting some business in which all partners share the profit according to a specific ratio while the loss is shared according to the ratio of the contribution". It is an ideal alternative for interest based financing with far reaching effects on both the production and distribution of wealth in the economy. It is a business contract under which the Islamic bank provides funds which are mingled with the funds of the business enterprise and others. All providers of capital are entitled to participate in the management but not necessarily required to do so. The profit is distributed among the partners in pre-determined ratios, while the loss is borne by each partner in proportion to his contribution. Musharakah is commonly used by banks to offer Home Finance, Car Finance to individual customers, Term Finance and Running Finance to SMEs, Corporate and Commercial organizations.