How musharkah Financing Works.

To begin with,Musharkah is an Islamic technique of investing and financing project and

business activities where by following procedures and steps based on agreements between
the negotiating parts. Commonly it’s a form of partnership where participants incorporate
capital and labour together in order to share the profits, liabilities and similar right’s.

On the other hand, Musharkah financing functions into different aspects and leads into well
defined objectives and importances. First, Musharkah financing deals with single
transactions including the import and export. Also the banks activates this tool for import
financing. Moreover, if the financier prefers to withdraw this deal(Musharkah) he may
purchase his ownership and transfer it to someone latter in order to share of the other party
who was willing to persuade his deal with agreed price. Musharkah is composed of two main
different group which are: i) non-contractual : this applies on ownership and works when
two or more than person forms ownership of an assets without having a partnership
agreement. II) contractual: it’s sharing of profits and risks and the partners form a
contractual agreement.
Apart from that, the diminishing musharkah Financing computation has the following
procedures. Annual rate of return can be solved by multiplying the monthly rental ,time
period divided by total equity times 100%.
There also a legal document and required documents having a musharkah contract.

Finally , musharakah is an instrument based on pre-agreed ratio of sharing profits and loss
and every participant shared according to his contribution ratio. It’s and Islamic mode of
financing which is aimed to prevent and ovoid the interest.

NAME: Abdifatah Abdirashid sh.Yonis

ID: 192042
CLASS: 2B
COURSE: ISLAMIC INSTRUMENTS