Musharaka

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Musharaka

It is of two types:

  • Permanent Musharaka: Bank and client share profits on a pre-agreed ratio according to a portion of each.
  • Diminishing Musharaka Ending in Ownership:

The bank is the financing party – partially or fully – in a project which has an expected return. It must be agreed that the bank obtains a relative ratio from the realized net income; meanwhile the bank keeps the remaining part (the partner’s share of the net realized profit) or part of it to settle the principal offered by the bank in the financing. After that, the project is wholly financed and owned by the other party.

  • Terms Of Financing
  • Documentation
  • Primary Documents for Companies
  • Bank Participation: Maximum 50% of the property value
  • Financing Period: Up to 10 years
  • Mode of Payment: Quarterly, semi-annual or annual terms are available
  • Source of Payment: Rentals of the property
  • Bank’s Rental: EIBOR rate plus margin applied on the outstanding value of the Bank’s share in the Musharaka Property for each rental period
  • Security:First class mortgage on the land and building, post dated cheques covering installments
  • Insurance: The Musharaka property is to be fully insured in Bank’s favour
  • Qualified Assets: Residential, office buildings and villa complexes

With our team of skilled professionals, applying for the Diminishing Musharika finance product is simple and stress-free, with primary documents varying based on requirement. Note that requirements may be lowered in cases where additional security is provided.

Primary Documents for Individuals:

  1. Valid passport copy
  2. Completed finance application form
  3. Site plan copy
  4. Title deed copy
  5. Copy of lease contracts covering purchase of existing rental property
  1. Valid trade license copy
  2. Commercial Registry copy
  3. Partnership agreement copy (in case of partnerships)
  4. Valid passport copies of partners (in case of partnerships)
  5. Valid passport copy of authorized personnel and copy of Articles of Association defining their powers
  6. Site plan copy
  7. Title deed copy
  8. Last 3 years’ financials
  9. Copy of lease contracts covering purchase of existing rental property
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Diminishing Musharaka

Diminishing Musharak is a form of partnership, which ends with one partner purchasing the entire share of the other partner’s property in that project by a redeeming mechanism, agreed by both parties.

How it works:
The bank and customer enter into a partnership for the purchase of a property, thereby having shared ownership. The bank then leases its share of the property to the customer and receives agreed rentals for the same. Periodically, the customer needs to purchase a pre-agreed percentage of the bank’s property share, thereby increasing customer ownership in the property and reducing the bank’s share by a similar amount. Eventually, the ownership of the entire property will pass to the customer on successful completion of the agreed lease term through a Sharia compliant sale mechanism

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The bank follows Shari’ah Law which seeks a “just” and “equitable” distribution of resources.