Musharakah

Equity financing. This is very similar to the Mudarabah contract, except that the customer puts up part of the equity. The Islamic financial institution and the customer provide financing for a specified project in agreed proportions. All parties have the right to participate in the project but the parties also have the right to waive such rights. Furthermore, in the event of loss, both parties will bear the losses in proportion to their participation. Profits and losses are shared in direct proportion to the respective contributions of the participants. The Islamic financial institution may receive an agreed management fee.

See also Mudarabah Exchange Handbook Glossary