---
title: "What is Unit buy-out price (diminishing musharakah)? | IslamicOpenFinance™"
description: "The price at which a customer buys the bank's units in a diminishing musharakah: market value or a price agreed at the time."
url: https://islamicopenfinance.com/glossary/unit-buy-out-price/
lang: en-GB
source: "IslamicOpenFinance"
---

[Glossary](https://islamicopenfinance.com/glossary/) / [Partnership and investment](https://islamicopenfinance.com/glossary/#partnership)

Partnership and investment

# Unit buy-out price (diminishing musharakah)

The price at which a customer buys the bank's units in a diminishing musharakah: market value or a price agreed at the time.

In a diminishing musharakah, the customer gradually buys the bank's share of the asset in units. AAOIFI's partnership standard allows a partner to give a binding promise to buy the other's share gradually at market value or at a price agreed at the time of each purchase, but does not permit stipulating that the units will be bought at their original or face value, because that would guarantee the bank's capital. Each unit sale is also to be independent of the partnership contract, so pricing and the timing of each purchase need their own records.

## Sources

- [AAOIFI Shari'ah Standards, English edition (full text, PDF): Shari'ah Standard No. 12, items 5/1 and 5/7](https://aaoifi.com/wp-content/uploads/2017/12/Shariaa-Standards-ENG.pdf)

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 musharakah** A partnership in which one partner buys the other's share in stages until it owns the whole asset; common in home finance.](https://islamicopenfinance.com/glossary/diminishing-musharakah/) [**Musharakah** A partnership in which each partner contributes capital; profit is shared as agreed and loss in proportion to capital.](https://islamicopenfinance.com/glossary/musharakah/) [**Wa'd (promise)** A unilateral promise to do something in the future; it can be made binding and is used in hedging, sukuk and lease-to-own deals.](https://islamicopenfinance.com/glossary/wad/) [**Variable rental (benchmark-linked ijarah rent)** Ijarah rent that is fixed for the first period and then reset by a clear benchmark formula agreed at the start.](https://islamicopenfinance.com/glossary/variable-rental/) [**Capital protection (as distinct from a guarantee)** Using permitted methods to safeguard invested capital, which AAOIFI distinguishes from the manager guaranteeing it.](https://islamicopenfinance.com/glossary/capital-protection/)

**Partnership and investment**

1. [Mudarabah](https://islamicopenfinance.com/glossary/mudarabah/)
2. [Musharakah](https://islamicopenfinance.com/glossary/musharakah/)
3. [Diminishing musharakah](https://islamicopenfinance.com/glossary/diminishing-musharakah/)
4. [Rabb al-mal](https://islamicopenfinance.com/glossary/rabb-al-mal/)
5. [Mudarib](https://islamicopenfinance.com/glossary/mudarib/)
6. [Profit sharing ratio](https://islamicopenfinance.com/glossary/profit-sharing-ratio/)
7. [Restricted mudarabah](https://islamicopenfinance.com/glossary/restricted-mudarabah/)
8. [Unrestricted mudarabah](https://islamicopenfinance.com/glossary/unrestricted-mudarabah/)

[All 221 terms](https://islamicopenfinance.com/glossary/)