Musharaka

Musharaka is one of the two pure islamic financing modes another of which includes Mudaraba. The term Musharaka comes from the term “shirkat” origin of which lies in the term of “shirk”. ‘Shirk’ means partnership. In Musharaka there must be partners. So, it is a partnership mode of financing. In our usual life we are using Musharaka widely but most of the cases we do not know we are involved with this term.

Musharaka is such a type of business technique which was in vogue before the advent of Islam. The Arabs were exclusively used to using this type of financing. So, when Islam came, this innocent method of business was adopted by Islam and certified by the norms of Islam.

On Musharaka Allah, the Almighty, says – “..... but if more than two, they share in a third.....” (Al-Nisa’: 12)

“Verily many are the partners (in business) who wrong each other except those who believe and work deeds of righteousness and how few of them.....” (Al-Sad’: 24)

Types of Musharaka:

There are two main types of Musharaka.

They are-

i.                   Shirkat ul Melk &

ii.                Shirkat ul ‘aqd

(i) Shirkat ul Melk: Especially known as joint ownership, shirkat  ul melk may come into existence in two different ways.

(i) If two or more persons purchase an equipment then it will jointly owned by them and such type of relationship will be called shirkat ul melk Bill Ekhtiar.

(ii) If the joint ownership comes from any automatic consequence that is after the death of a person his heirs will inherit his property which comes into their joint ownership after the consequences of the death of that person. This type of shirkat is called shirkat ul melk Bill Jabar.

(2) Shirkat ul aqd’: Especially known as partnership affected by a mutual contract actually indicated joint commercial enterprises.

There are three types of shirkat ul ‘aqd. They are –

i.                   Shirkat ul amwal

ii.                Shirkat ul Amal

iii.             Shirkat ul Wujooh

(i) Shirkat al amwal: When all the partners invest some capital into a commercial enterprise.

There are two types of shirkat ul amwal. They are-

a)    Shirkat al Inan

b)    Shirkat al Mufawada

(a) Shirkat al Inan: When partners invest unequal parts of capital as well as provide unequal effort and the profit distributed as per agreement or contract and the loss is distributed as per capital provided by the partners.

(b) Shirkat al Mufawada: When partners invest equal parts of capital and both the profit and loss are distribute equally then it is called shirkat al mufawada.

(ii) Shirkat al Amal: When some partners whose technically knowledgeable on the same ground and undertake a business to provide services to the customers where charged for their services are distributed as per agreement then it is called shirkat al amal or shirkat al shanai.

(iii) Shirkat al wujooh: When the partners have no investment but by using their credibility they purchase the products on credit and sell then on cash then distribute the profit as per agreement then it is called shirkat al wujooh.