Musharakah
A partnership in which each partner contributes capital; profit is shared as agreed and loss in proportion to capital.
Musharakah is a partnership between two or more parties in which all partners share the profit and bear the loss of the venture, as Bank Negara Malaysia's glossary defines it. Under the prevailing rule, profit may be shared by any agreed ratio, while losses are borne in proportion to each partner's capital. It is used for project and working capital finance and, in its diminishing form, for home finance.
Sources
This entry explains a term; it is not a Shariah ruling. Approving a product is for each institution's own Shariah board and regulator.
Related terms
Diminishing musharakahA partnership in which one partner buys the other's share in stages until it owns the whole asset; common in home finance.Shirkat al-milk (co-ownership)Co-ownership of an asset by two or more parties, whether by choice, as in a joint purchase, or by circumstance, as in inheritance.MudarabahA partnership of capital and work: profit is shared by an agreed ratio, while financial loss falls on the capital provider.Profit sharing ratioThe agreed split of profit between partners, expressed as a ratio of actual profit, never as a fixed sum or a share of capital.Sukuk al-musharakahSukuk whose holders are partners in a venture, sharing profit by agreed ratios and loss in proportion to capital.