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DIMINISHING MUSHARAKAH

Diminishing Musharakah is a combination of 3 independent contracts where in two or more partners jointly own an asset. One of the partners leases his portion of the asset to the other(s) along with selling a part of his ownership to the other partner on a periodic basis in a manner that results in the complete transfer of the ownership of the asset from one partner to another by the end. If you are looking to procure an asset with a certain down payment and require long term financing, Trafin’s Diminishing Musharakah Finance is the best fit. Under this arrangement, Trafin initially pools funds with you to purchase the required equipment and therefore becomes a joint owner in the purchased equipment. Subsequently, it leases its share of the asset to you against periodic rental payments. Alongside, in each instalment, it also sells to you a part of its share thereby reducing its ownership after each instalment. At the end of the tenor i.e. after all of Trafin’s share have sold to you, you become the sole owner of the asset.

MUSHARAKAH CONTRACT DETAILS

it’s a partnership contract between the client and the bank where both parties will participate in the capital as a specified ratio at the time of contract. This facility is more suitable for a large buyer who wants investment in its infrastructure, machinery, and land. The profit will be shared among the partners at a specified ratio. In case of loss, it will be shared as per capital proportion.

MUSHARAKAH PROCESS

01

REQUESTING CAPITAL

The Customer will approach the bank and request for capital

02

MUSHARAKAH

Both parties will enter into an a partnership through a Musharakah Agreement which will create a joint ownership in the Musharakah Assets.
03

RENTAL ARRANGEMENT

Trafin will rent its share to the Client against periodic rental payments.
04

TRANSFER OF OWNERSHIP

Trafin will sell its share in the Musharakah Asset(s) to the Client periodically in a manner by which the complete ownership would be transferred to the Client at maturity.

HOW MUSHARAKAH CONTRACT CAN HELP YOU

KEY BENEFITS OF A MUSHARAKAH CONTRACT

RATE REVISION

The installments may be revised periodically with mutual consent.

LONG TERM CONTRACT

Usually, it’s a long term partnership for moveable, fixed assets and public projects.

SHARED RISK

Both Trafin and the Client share the risk of the Musharakah Assets to the extent of their ownership ratios.

Expert Advice

The above information provides beneficial knowledge about contracts in Islamic finance. The content is provided for information purposes only. For more details, please reach out to one of our Expert Today.

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