Diminishing Musharakah Agreement

The reduction in The size of Musharaka means that the bank and the customer enter into a co-ownership agreement for an identified property. The proportional share of each party in the property is determined by its respective financial contribution to the co-ownership agreement. The client then agrees to purchase the bank`s share of an agreed-upon mark-up, usually on an annual basis, which has the effect of completely reducing the bank`s share during the duration of the financing agreement. At the end of the life, the customer becomes the sole owner of the property. Innovation – Customers looking for additional cash relief or working capital can use the Islamic proceeds of commercial real estate financing to free up some money or cash from the property or real estate released. This would mean that the bank and the customer enter into a co-ownership agreement on the identified commercial property, with the bank acquiring a share of the client`s property at an agreed price. Flexibility – Customers can choose each year to purchase an increased share of the property by paying a lump sum in addition to the share they wish to acquire in tranches next year. The customer can also acquire the property at any time during the entire contract. In addition, the client can choose from flexible financing terms of five to ten years, depending on the circumstances. In addition to financing residential home loans, Agreements on The Reduction of Musharaka have recently found themselves in various forms of Islamic financing projects, particularly in those where equity leasing is possible, as well as in various forms of Islamic financing. Leasing operations may take into account variable or variable returns. This allows Islamic financial institutions to take responsibility for reducing The Size of Musharaka to finance long-term projects, even in inflationary economies. This broadens its scope and goes beyond the field of micro-enterprise development, which is still considered the most advantageous aspect of this form of musharaka financing.

The reduction of Musharaka agreements also varies on the basis of the different sub-contracts that come into play at different stages of the association. These sub-contracts are also consistent with Sharia principles and are most often invoked when there is a co-ownership agreement between two or more persons, when a partner leases part of its share or when a partner sells its share to other partners in the contract. This promise will not be part of Shirkah`s agreement. The price of the unit is not agreed in this promise, but the promise to purchase should be at market value at the time of purchase. In the most common form of musharakas reduction, the ratio of profit distribution between financier and borrower is proportional to the ratio of equity distribution. The distribution of losses is also calculated on a pro-rata basis. However, these profit and loss shares must be defined accurately when executing the contract. There may be discrepancies with this profit-loss sharing agreement.

3. “A” wants to source finished clothing, but does not have the resources to do so. “B” commits to participate with him for a fixed period, say, two years. 40% of investments are supported by “A” and 60% by “B.” Both start the business on the basis of musharakah. The individual`s share of profit is expressly agreed upon. At the same time, “B`s share of the company is divided into six equal units and `A` gradually buys these units until, at the end of a two-year period, `B` leaves the company and leaves its exclusive ownership to `A`.