Musharakah in Constructing Housing Flats

Shafiullah Jan ,Karim Ullah ,Zohra Jabeen

doi:10.26501/jibm/2018.080s-004

Abstract

Musharakah financing is Shari‘ah based equity financing, which is rarely utilized in the banking practices due to multiple risk exposures in partnership based ventures. This case article pertains to musharakah project financing by a bank in Pakistan to highlight different types of risks associated with implementation of musharakah based financing in the industry. The approach adopted in this research study is narrative based where different steps for the implementation of musharakah financing including associated risks and issues are highlighted in terms of compliance with Shari‘ah, particularly in the context of using musharakah in the construction of residential flats.

Highlights

Ideally, equity based financing based on commercial partnership (Shirkah al-‘aqd), preIslamic in nature (Choudhury, 2004), is one of the core pillars of Islamic banking system
Data about financing by Islamic banks show that such modes of financing have limited role in the financial compositions of Islamic banks compared to the other modes of financing (Jan & Asutay 2018; Nouman & Ullah, 2014)
According to Jan and Asutay (2018), musharakah and mud. arabah, together contributed just over 6 percent of total financing by Islamic banks globally compare to 71 percent by murabah. ah and deferred sale. 1

Summary

Introduction

Equity based financing based on commercial partnership (Shirkah al-‘aqd), preIslamic in nature (Choudhury, 2004), is one of the core pillars of Islamic banking system. Musharakah financing is a Shari‘ah based financing where bank and entrepreneur both supply the capital and share management and profit of the entity or project.

Objectives

Results

Conclusion