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Musharaka is a contract whereby the bank and a customer agree to combine their financial resources for the establishment or running of a business or project, or for undertaking any type of business activities. The two parties agree to manage the project in accordance with the terms of the contract. The profit or loss will be apportioned between the parties pro rate their participation in the invested capital.  Unlike the sharing of loss, the sharing of profit may be or may be not pro rata the share of the parties in the capital, depending on the additional work or responsibilities that either of the two parties may shoulder.

Types of Musharaka Contracts:

  1. Permanent Musharaka (Musharaka by contributing a share of the capital): In a Permanent Musharaka, the Bank's share in the capital stays as it is in terms of amount, and the bank continues to receive its share of the profit generated by the Musharaka as long as the Musharaka continues.

  2. Diminishing Musharaka (long-term financing): In a Diminishing Musharaka the bank's share decreases gradually as a result of a gradual sale of its shares to the customer against the payment of instalments. The bank makes profit by selling the share at a price which is higher than its original value.  
  Last Updated:14/05/2009
  About Al Baraka
Al Baraka Islamic Bank - Bahrain (AIB - Bahrain) established 1984 in Bahrain and up the years has pioneered the development of Isl... read more>>

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  Commercial & Corporate
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