Diminishing Musharaka

By

Bank of Khyber (BOK)

Karkhano Market Branch

Actual Practices

The actual practices in the market of diminishing

Musharkah was conducted from credit officer
Mufti Asad of the Bank of Khyber Karkhano
branch.

Discussion based interview which lasted about 50

minutes.

Asset of Diminishing Musharkah

Most of the times, diminishing Musharkah is done for house financing

Bank of Khyber also makes this contract for vehicle financing,

machinery and business financing

Eligibility Criteria

The customers salary is not considered as criteria for the contract

That asset must cover 90% of the amount of diminishing Musharkah

Location

Most important criteria of eligibility for diminishing

Musharkah

Location has a very strong impact on the contract

Contribution ratio

Typically, 80-20 ratio is found in theory

However, in practice, this ratio is not fixed.

Time limit

Depends on the request of customer

High installments lesser time and vise versa

Limit of Diminishing Musharkah

The practices of Bank of Khyber have found no limit in

diminishing musharkah for the size of house or amount.

depends on the request of the customer and the asset the

customer offers for the collateral

Ownership Transfer

Ownership of the asset is with the BOK, throughout the contract.

Ownership transfer occurs from BOK to customer when the

customer has already purchases 99% of shares and pays the last
installment

Tax Payment Ratio

The bank of Khyber pays only that amount of tax for the asset as
per the ratio of ownership of the asset

Losses of the Property

The Bank of Khyber secures this loss with the help of Takaful

Usually the BOK purchases policies from Qatar Takaful

Company and Takaful Pakistan

Termination of the Contract

To inform the bank of Khyber about the termination and

should give a written reason for it

If the customer does not inform the bank, then bank can
sue the customer for its losses.

Flow Diagram
Process
Start and
End

Input
and Out
put

Decisi
on

Diminishing
Musharika by
Bank and
partner

House

Eligibility
screening

Eligib
le

Thank You