Sukuk al-musharakah
Sukuk whose holders are partners in a venture, sharing profit by agreed ratios and loss in proportion to capital.
Sukuk al-musharakah represent the holders' shares in a partnership, with the sukuk proceeds contributed as capital alongside the originator's contribution. Holders share profit by the agreed ratio and bear losses in proportion to their capital. The structures often include an undertaking by the originator to buy the holders' shares at maturity, and the price basis of that undertaking is a key point of Shariah review.
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
SukukCertificates of equal value representing undivided shares in the ownership of assets, usufruct, services or a project.MusharakahA partnership in which each partner contributes capital; profit is shared as agreed and loss in proportion to capital.Purchase undertakingA unilateral promise by the originator or obligor to buy the sukuk assets from the holders at maturity or on default.Sukuk al-mudarabahSukuk whose proceeds are capital in a mudarabah managed by the issuer; used by some Islamic banks to raise regulatory capital.