Premium Essay

Diminishing Musharakah

In: Business and Management

Submitted By akshay91
Words 339
Pages 2
Musha rakah basically represents partnership whereby the partners share the profit according to agreed ratio/proportion, while the loss is to be shared in proportion to the capital invested by the partners. A form of musharakah that has been developed in the near past is Diminishing Musharakah. This concept broadly refers to diminishing partnership whereby a product/project becomes fully owned by a client. It is defined by some as a combination of sale and sharing contracts whereby the ownership is transferred through sale and this transfer is done through profit sharing arrangement.
A DM agreement is made up of three portions. The first one consists of musha¯rakah (partnership) between the customer and the bank. This is done through the contract of ’Shirkat-ul-milk meaning joint partnership over an asset. For example, the customer and the bank buy a house with initial capital investment equals 20 and 80 per cent by them, respectively. Second portion is implemented through the contract of ija¯ ra between the customer and bank. Here, the customer rents the house from the bank and pays the rental payment, which is shared between the two based on their percentage of shares. Finally, the customer will continue to buy the shares of the bank gradually until the house is fully owned by him. Slowly, the shares of the customer will increase while the shares of the bank will decrease, through the periodical repayment by the customer, until the house is fully owned by the customer. This is carried out through the sale contract (bay).
There are some conditions however to be respected for this mode of finance. Firstly, the agreement of joint purchase (musha¯ rakah), leasing (ijarah) and selling the financier’s shares in asset should not be combined in one single contract. Also whenever a sale or purchase of new shares takes place, there should be offer and…...

Similar Documents

Premium Essay

Diminishing Return

...Diminishing returns is an evaluation of the end result of a repeated activity, one of the factors being observed must be fixed and the other variable. The fixed factor is usually the thing that is benefiting from the investment. The variable factor is the thing that the investment funds are spent on to use on the fixed variable in improving it. The activity that involves the fixed and variable factors must be repetitive. For example, think about a car. As it is used, the car will require repairs to improve its performance. However, at some point the car will be too old to really be improved by the repairs. The fixes will only serve to keep the car functioning, not improved. This is diminishing returns. Each additional investment will bring less and less of an improvement until you are simply paying to keep the car functioning. In Studying, the fixed factor would be to make a passing grade and move on to the next classes without failure. The variable factor would be studying and meeting the requirements of the class to make a passing grade. A lot of activity plays into the variable factor. Because we are in an online learning environment we are required to have computers that contain the software, and the counterparts needed to complete assignments. We must have the resources to study with to include books and online material and last we must put time into studying. The Diminishing return would be if computers were no good and we had to constantly struggle with getting......

Words: 275 - Pages: 2

Premium Essay

Islamic Banking

...investing. While this might sound odd to someone who is used to Conventional Banking, the literature discussed here will provide insight as to how money can be made on interest-free financial activities. It is important to note that in order for a financing activity to be considered permissible by Islam, it has to adhere to stated Shari'a law in the Quraan or to the consensus of leading Islamic scholars (Warde, 2000). Musharakah is a partnership created on the basis of profit and loss sharing depending on how well the business does. It is a form of loan where the bank provides funds to the partnership and the funds are pooled together with the rest of the business earnings, however, unlike the conventional interest-bearing loans, this 'loan' is repaid by the sharing of profits among partners including the bank; this means that losses are also shared even by the bank providing the funds the amount is of profit or loss is relative to the bank and client funding contribution (Investopedia, Musharakah). Another form of such partnership is called Diminishing Musharakah where the client buys out the bank's share overtime. This type of financing is very important in today's economy because it eliminates moral hazard borne by banks that have no discretion when it comes to risk taking because they will still get paid by the clients due to interest on loans regardless if the business is doing well or not. Murabaha is a form of credit sale of assets provided by the bank to a client.......

Words: 2022 - Pages: 9

Premium Essay

Diminishing Values of Reality Television

...Diminishing Values of Reality Television Karen Christy ENG122: English Composition II Sara Esquivia May 5th, 2012 Reality television has set low standards for ourselves and our youth in society today, such as glorifying being sixteen and pregnant, how real housewives in the "city" act, and having toddlers look too grown up for their ages. There are still some good values in some programs but there seem to be more diminishing values in reality television shows. Reality television has distorted reality for our children in this society. The show Jersey Shore has little positive values in its episodes. The positive values that are portrayed for teens and young adults to pick up on are loyalty and family importance. Then we have the diminishing values of Jersey Shore. In the show you have a group of young adults who show no regard for caring about what they do to the insides of their bodies. Jersey Shore shows the group binge drinking, which leads to making out with complete strangers and then bringing random people back to the home. Jersey Shore has no talks on the show about using condoms, the different types of birth control out there, or the risks of catching a sexual transmitted disease. The girls run around on the show wearing almost next to nothing and calling it clothing, and the whole group portray sexual activity is no big deal. When teenagers and young adults see this they believe this as being okay for them to repeat. This is not the message......

Words: 2465 - Pages: 10

Free Essay

Tutorial 2 (Waharzatul Huda)

...Accounting treatment of Musharakah Financing Musharakah financing is where an Islamic bank enters into a partnership with entrepreneur(s) to invest in a feasible business project. If there is profit, it will be shared based on pre-agreed ratio, and if there isloss, it will then be shared according to capital contribution ratio. In the case of Musharakah mutanaqisah , capital is not permanent and every repayment of capital by the entrepreneur will diminish the total capital ratio for the capital provider. This will increase the total capital ratio for the entrepreneur until the entrepreneur becomes the sole proprietor for the business. The repayment period is dependent upon the pre-agreed period. This scheme is more suitable for the existing business that need new or additional capital for expansion. The salient feature of Musharakah is on the profit and loss sharing arrangement which is based on fair distribution of risks and efforts. The need for proper accounting to measure the capital contribution is very important in the case diminishing Musharakah (Musharakah mutanaqisah). This is due to the Shari’ah requirement as in the case of loss, the loss must be fairly distributed based on capital contribution ratio. The Musharakah financing is an equitable concept that reflects the rights of the partners. The profit and loss sharing concept encourage partners to effectively contribute in the business. The accounting implications indicate that Musharakah financing needs proper......

Words: 564 - Pages: 3

Free Essay

Guide to Islamic Banking

...production in Islam The objectives of the distribution of wealth in Islam 11 19 29 SECTION II RIBA, ITS PROHIBITION & CLASSIFICATIONS 4 5 6 7 8 Chapter 4: Chapter 5: Chapter 6: Chapter 7: Chapter 8: Riba in the Qur'an Riba in Hadith Riba and its types Commercial interest and usury Simple and compound interest 34 36 42 53 62 SECTION III ISLAMIC CONTRACT 9 10 11 12 Chapter 9: Chapter 10: Chapter 11: Chapter 12: Islamic contract Sale Valid Sale Five khiyars 66 68 70 77 SECTION IV ISLAMIC MODES OF FINANCING 13 Chapter 13: Musharakah 14 Chapter 14: Mudarabah 4 81 98 Meezan Bank’s Guide to Islamic Banking 15 16 17 18 19 20 21 Chapter 15: Chapter 16: Chapter 17: Chapter 18: Chapter 19: Chapter 20: Chapter 21: Diminishing Musharakah Murabaha Salam Istisna’ Istijrar Ijarah (Leasing) Ijarah Wa Iqtina 108 118 126 131 135 138 151 SECTION V BANKING IN ISLAM 22 Chapter 22: The features of a conventional Bank 23 Chapter 23: Musharakah in bank deposits 155 161 SECTION VI APPLICATIONS OF ISLAMIC FINANCING 24 25 26 27 Chapter 24: Chapter 25: Chapter 26: Chapter 27: Project financing Working capital financing Import financing Export financing 171 175 180 182 SECTION VII ISLAMIC INVESTMENTS 28 Chapter 28: Securitization 29 Chapter 29: Islamic Investment Funds 30 Chapter 30: The principle of limited liability 187 193 207 5 Meezan Bank’s Guide to Islamic Banking PREFACE 6 Meezan Bank’s Guide to Islamic Banking PREFACE Today the......

Words: 55893 - Pages: 224

Free Essay

Diminishing Literacy in an Age Characterized by Advanced Communication Technologies

...Diminishing literacy in an age characterized By advanced communication technologies When you think of how you or some of us send a text, most of the time it is not in proper grammar or even spelled correctly. The term “IDK” replaces “I don’t know” and “u” replaces the word “you”. All this change was to help make texting easier at the time when texting first started. People had the want and need to communicate using text lacking the time and convenience to type out full words, sentences, and paragraphs. It was at this time Techs language a group of individual words or fragments of sentences in languages that deals with texts as communication systems was formed. Now we as a people have become so use to our text language, it has made it that much harder own grammar. The toll it has taken it proven evident when some of us sit down to write a letter, paper, fill out a form or write an essay with pen and paper. We fail to be able to express our feelings and write in a way that is understandable to the reader as pen and paper have no spell check attached to them. It has been proven in Penn states media effects research laboratory said the use of these shortcuts hinders a teen’s ability to switch between techs speak and the normal rules of grammar. One cannot help but notice that this is a hindrance that college students face in today’s society as we watch the professors post notes and emails begging that we all take the time to check are......

Words: 616 - Pages: 3

Premium Essay

Mass Marketing Is Diminishing

...Mass Marketing is Diminishing Some claim that mass marketing will always exist for the large brands that target the mass market. Others claim that mass marketing is becoming less significant. I believe mass marketing is becoming less significant due to advancements in technology and the impact of cultural diversity. I will describe why I think these two major factors are eliminating mass marketing along with what I believe the future holds for mass marketing. Advancements in Technology Technology has evolved over the years from the Internet to smartphones to social media and is now a part of our everyday lives. In addition, with technological advancements companies now have more than ever the ability to maintain customer databases. I believe for a company to become successful marketing strategies need to adapt to changes in technology. Internet, Smartphones, Social Media Prior to the emergence of the Internet companies used mass marketing because the strategy was to reach as many consumers as possible. Then the Internet enabled consumer’s endless access to information, thus changing their purchasing behavior. Consumers are able to become more knowledgeable about products than ever before. Marketing efforts need to be adjusted to appeal to Internet users. According to Kotler and Keller (2012), “The widespread usage of the Internet allows marketers to abandon the mass market practices that built brand powerhouses in the 1950s, 1960s, and 1970s” (p. 135). Then......

Words: 1120 - Pages: 5

Free Essay

Point of Diminishing Return

...Project II- Point of Diminishing Returns Name: ____________________________ Due: Monday, June 24, 2013 Please read each question carefully and be sure to answer all parts. Show all of your work. ____________________________________________________________________________ The total amount of revenue made by the Miramar Resort Hotel is given by the function , , where x is the amount of money the hotel spends on advertising its services, and where both revenue and x are measured in thousands. 1. Using Wolfram Alpha, graph the revenue function over the given domain and paste the graph here. 2. Compute the marginal revenue function R'x and copy and paste a graph of this function on the domain here. Then use Wolfram Alpha to determine where revenue is increasing and where revenue is decreasing. Write your answers using interval notation. (0, 150) Revenue is increasing (150,300) Revenue is decreasing. 3. How much money (in dollars) should the hotel spend on advertising to maximize its revenue? What is the maximum revenue in dollars? The hotel should spend $250,000 to reach their maximum revenue. 4. Compute the second derivative of R(x). Copy and paste the graph of the second derivative here. On which intervals is the function concave up? Explain what is happening to revenue on this interval. According to the graph the function is not a concave up but is concave down at all points. After 150 the revenue is turning into a loss. This......

Words: 415 - Pages: 2

Premium Essay

Explain How a Firm Can Experience Diminishing Returns in the Short-Run and Economies of Scale in the Long Run. (15 Marks)

... Explain how a firm can experience diminishing returns in the short-run and economies of scale in the long run. (15 marks) Economies of scale is a long-run concept experienced by firms whereby lower average costs is achieved as a result of an increase in the scale of production. It can occur both internally and externally. Examples of internal economies of scale include: technical, marketing, managerial, financial, network and specialisation of the workforce. The law of diminishing return states that as additional units of a variable factor (such as labour) are added to a fixed factor(such as premises), the extra unit of output from the variable factor will eventually diminish (this is a short-run concept). <Insert cost curve envelope> The above diagram illustrates a cost curve envelope. As a new firm starts to produce a good or service in an industry, they under produce at point Qa. The firm then starts to utilise their resources and eventually reach optimum efficiency as shown in the diagram above at point Qb. If a firm starts to overproduce and over utilise their resources due to massive order by a large firm required within a short time period, they will produce at point Qc at cost AC. At this point, each extra marginal unit of labour added to the fixed cost will produce fewer marginal units of labour and therefore the firm experiences the law of diminishing returns as total output is still increasing but at a diminishing rate. In the long run a firm......

Words: 343 - Pages: 2

Premium Essay

How Does Shakespeare Present the Diminishing of King Lear in Acts 1 and 2?

...The play’s plot is driven by the power and consequence of losses, more specifically, the losses and diminishing of Lear. In the course the play, King Lear, because of his flaws, loses his authority as a king, his identity as a father, and his sanity as a man. The play begins with King Lear's decision to divide his kingdom among his three daughters. This is the first sign of Lear's loss and diminishing of his power through the loss of his authority. Wanting to abandon his responsibilities before his time, Lear claims, "tis our fast intent / To shake all cares and business from our age, / Conferring them on younger strengths while we / Unburdened crawl toward death". It can be argued that this diminishment comes from his own decision to prematurely abdicate the throne. Lear carries immense insecurity and egotism as he announces that he will offer the largest share of kingdom to the daughter who professes the greatest love for him. Goneril and Regan both proclaim in fulsome terms that they love him more than anything in the world, while Cordelia speaks from her heart in honest terms that she loves him exactly as a daughter should love her father. Valuing self-importance above all else, Lear is blind to the loyalty and love of Cordelia and instead, perceptive to the flattery of his two vile daughters. This only furthers the notion that his diminishing is not only largely self initiated and inflicted but also that it is largely deserved as one is likely to sympathise with......

Words: 498 - Pages: 2

Free Essay

Business Strategy

...National College of Business Administration & Economics (NCBA&E) Business Strategy Assignment: Detailed Analysis of Islamic Banking in Pakistan. Submitted By: Saad Alam 2151407 Submitted To: Sir Qayyum Qureshi | | | | | Type | Public Limited | Traded as | KSE: MEBL | Industry | Islamic Banking, Commercial Banking | Founded | 1997 | Headquarters | Karachi, Pakistan | Products | Murabaha, Ijarah, Diminishing Musharakah, VISA Debit Card, Saving Accounts, Consumer Banking etc. | Number of employees | 7,000 - 2014 | Slogan | The Premier Islamic Bank | Website | www.meezanbank.com | | PROFILE:Meezan Bank (Urdu میزان بینک) is the first and largest Islamic commercial Bank of Pakistan. The Bank is headquartered in Meezan House - Karachi, Pakistan. It has a network of over 490 branches in more than 100 cities of Pakistan. It commenced operations in 2002 when State Bank of Pakistan issued first-ever license for Islamic commercial banking. The Bank has a market share of 35% in Islamic banking industry of the country.JCR-VIS Credit Rating Company Limited, an affiliate of Japan Credit Rating Agency, has rated the Bank’s short term rating at A1+ (A-One Plus), the highest standard in short term rating, and the long-term entity rating at AA (Double A) with “Stable” outlook, making it the only Islamic bank with AA credit rating in the Islamic banking industry of Pakistan. | | HISTORY:The......

Words: 1272 - Pages: 6

Premium Essay

Islamic Financing

...SUMMARY OF ARTICLE 6 TITTLE: Home Financing through the Musharakah Mutanaqisah Contracts: Some Practical Issues by Ahamed Kameel Mydin Meera and Dzuljastri Abdul Razak. As an introduction, authors made a comparison between Al-Bay’ Bithaman Ajil (BBA) and Musharakah Mutanaqisah Partnership (MMP) where they contended that MMP is better than BBA due to few reasons. BBA was claimed to has higher financing balance compared to conventional loan and on the other side as for bankers, liquidity management problem may arise because of BBA fixed financing mode that caused by cost of funds that based on floating rate whereas income are from fixed rate. Therefore, the authors did not favour BBA compared to MMP. MMP is said to be based on a diminishing partnership concept. It has 3 stages; firstly, it is called musharakah where customer and bank join ownership together to own the asset being financed. Secondly, the bank leases its share in the asset ownership to the customer which this is called as ijarah. Thirdly, this is known as bay where customer gradually buys the bank’s 80% shares at an agreed portion periodically until the customer can fully own the asset. In the other words we can say that customer will pay periodic rental amount according to the agreed percentage which keeps changing. Share ratio owned by customer will increase as periodic redemption until finally the asset will be fully owned by him. There are main benefits derived from MMP, some of them are MMP is......

Words: 570 - Pages: 3

Premium Essay

Investment Analysis

...Bangladesh Ltd. has below categories: DEPOSIT SCHEMES: Al-Wadiah Current Account (AWCA) Mudaraba Savings Account (MSA) Mudaraba Term Deposit Account (MTDR) Mudaraba Special Notice Account (MSNA) Mudaraba Hajj Savings Account (MHSA) Mudaraba Special Savings (Pension) Account (MSSA) Mudaraba Savings Bond (MSB) Mudaraba Monthly Profit Deposit Account (MMPDA) Mudaraba Mahr Savings Account (MMSA) Mudaraba Waqf Cash Deposit Account (MWCDA) Mudaraba NRB Savings Bond (MNSB) Account Mudaraba Foreign Currency Deposit Account (MFCD) Students Mudaraba Savings Account (SMSA) Mudaraba Farmers Savings Account (MFSA) Investment Modes: BAI- Modes Bai-Murabaha Bai-Istijrar Bai-Muajjal Bai Salam Istishna Bai-Asharf SHARE- Modes Mudaraba Musharakah IJARA-Modes Hire Purchase under Shirkatul Meelk (HPSM) Under this mode Bank may supply implements/ equipment/goods on rental basis. The ownership of the implements/equipment/goods will be with the Bank and the client jointly and the portion of the client will remain to the Bank as mortgage until the closure of the investment account, but the client will be authorized to possess the equipment for certain period. The client, after completion of the installments, will be the owner of the implements/ equipment/goods. INVESTMNET SCHEME Household Durables Scheme (HDS) Investment Scheme for Doctors (ISD) Transport Investment Scheme (TIS) Car Investment Scheme (CIS) Small Business Investment Scheme (SBIS) Micro Industries......

Words: 6421 - Pages: 26

Premium Essay

Islamic Finance

...Finance = = = jìÑíá=jìÜ~ãã~Ç=q~èá=rëã~åá `çåíÉåíë= Foreword Some Preliminary Points _ÉäáÉÑ=áå=aáîáåÉ=dìáÇ~åÅÉ= qÜÉ=_~ëáÅ=aáÑÑÉêÉåÅÉ=ÄÉíïÉÉå=`~éáí~äáëí=~åÇ=fëä~ãáÅ= bÅçåçãó= ^ëëÉíJÄ~ÅâÉÇ=cáå~åÅáåÖ= `~éáí~ä=~åÇ=båíêÉéêÉåÉìê= mêÉëÉåí=mê~ÅíáÅÉë=çÑ=fëä~ãáÅ=_~åâë= 6 9 V NM NO NQ NR Musharakah qÜÉ=`çåÅÉéí=çÑ=jìëÜ~ê~â~Ü= qÜÉ=_~ëáÅ=oìäÉë=çÑ=jìëÜ~ê~â~Ü= Distribution of Profit Ratio of Profit Sharing of Loss 17 NV OP 23 24 24 qÜÉ=k~íìêÉ=çÑ=íÜÉ=`~éáí~ä= j~å~ÖÉãÉåí=çÑ=jìëÜ~ê~â~Ü= qÉêãáå~íáçå=çÑ=jìëÜ~ê~â~Ü= Termination of Musharakah without Closing the Business OR OU OU 29 Mudarabah _ìëáåÉëë=çÑ=íÜÉ=jìÇ~ê~Ä~Ü= aáëíêáÄìíáçå=çÑ=íÜÉ=mêçÑáí= qÉêãáå~íáçå=çÑ=jìÇ~ê~Ä~Ü= `çãÄáå~íáçå=çÑ=jìëÜ~ê~â~Ü=~åÇ=jìÇ~ê~Ä~Ü= 31 PO PP PQ PR ÅçåíÉåíë= Musharakah & Mudarabah as Modes of Financing mêçàÉÅí=cáå~åÅáåÖ= Securitization of Musharakah Financing of a Single Transaction Financing of the Working Capital 37 PU 39 42 43 pçãÉ=lÄàÉÅíáçåë=çå=jìëÜ~ê~â~Ü=cáå~åÅáåÖ= Risk of Loss Dishonesty Secrecy of the Business Clients’ Unwillingness to Share Profits House Financing on the Basis of Diminishing Musharakah Diminishing Musharakah for Carrying Business of Services Diminishing Musharakah in Trade RO aáãáåáëÜáåÖ=jìëÜ~ê~â~Ü= 52 54 55 56 RT 59 63 63 Murabahah fåíêçÇìÅíáçå= Some Basic Rules of Sale Bai’ Mu’ajjal (Sale on Deferred Payment Basis) 65 SR 66 70 jìê~Ä~Ü~Ü= pçãÉ=fëëìÉë=fåîçäîÉÇ=áå=jìê~Ä~Ü~Ü= Murabahah as a Mode of Financing......

Words: 61209 - Pages: 245

Premium Essay

Ryan's Diminishing Hope

...Ryan’s Diminishing Hope When I think of Paul Ryan, I can’t help but draw parallels to the concept of Replicants in The film Blade Runner. In it, Replicants are high-functioning androids that require a special test to distinguish them from real human beings. They were the bright star highlighting mankind’s technological and scientific achievements. However, they quickly became one of the greatest disappointments, and had to be “retired” before they could do more harm. Ryan is the GOP’s golden boy, a bright star in the Republican party’s sky. He’s a cookie cutter replication of the Team Party meets GOP agenda. However, the initial excitement over Paul Ryan has started to wane as more light is shed on the disappointing hypocrisy surrounding his views on government spending. Recently, Ryan Grim of the Huffington Post revealed how Ryan initially supported the economic stimulus as a solid recovery tool when it was proposed by the President George W. Bush. “What we're trying to accomplish today with the passage of this third stimulus package is to create jobs and help the unemployed," Ryan said, in comments unearthed by MSNBC's ‘Up with Chris Hayes’ and provided to HuffPost. "What we're trying to accomplish is to pass the kinds of legislation that when they've passed in the past have grown the economy and gotten people back to work.” And he even goes on to state that “In recessions unemployment lags on well after a recovery has taken place." But after President Obama......

Words: 695 - Pages: 3