PRESENTED TO: PROF. SHAHID GHORI PRESENTED BY: SYED WAQAS HASSAN ABDUL HASEEB JONATHAN JIWAN MALL MUHAMMAD ALI RAZA ARSLAN AHMAD

CONTENT DEFINITION NATURE OF MUSHARAKAH EVIDENCE PILLARS OF MUSHARAKAH FLOW OF MUSHARAKAH TYPES OF MUSHARAKAH CATEGORIES OF MUSHARAKAH CONDITION OF MUSHARAKAH DISSOLUTION OF MUSHARAKAH

DEFINITION Musharakah is also known as al-sharikah (الشركة) Literally: mixture of properties whereby one cannot be differentiated from the other Mixing of two properties so that they could not be distinguished from each other Technically: A form of partnership where two or more persons combine either capital or labor or creditworthiness together to carry on a business venture on condition that they will share the profits, enjoying similar rights and liabilities.

NATURE OF MUSHARAKAH It is basically a profit and loss sharing partnership whereby the ratio for the distribution of profits must be determined and specified in advance If one partner is to be paid a fixed remuneration he will not be deemed a partner

EVIDENCE Hadith: Reported by Abi Hurairah R.A that the Prophet S.A.W said “Allah had said that: “I am the third of the partners, as long as any one of them does not betray the other. If he/she does betray the other, I will withdraw (move away) from them” Reported by As–Saib Al–Makhzumi R.A that he used to be a partner of the prophet S.A.W (in business) before his prophet-hood. During the opening of Mecca he said to the prophet S.A.W: “Welcome my brother and partner!”

ABDUL HASEEB

PILLARS OF MUSHARAKAH Shuraka’ Ra’sul Mal Mashru’ Ribh Sighah Shareholders Ra’sul Mal Capital Mashru’ Project or business venture Ribh Pre-determined profit allocation Sighah Ijab (Offer) Qabul (Acceptance )

(Predetermined profit rate) FLOWS OF MUSHARAKAH Ra’sul-Mal (Capital) Mashru’ (Project) Shuraka’ (Shareholders) Ribh (Predetermined profit rate) Ijab & Qabul Profit

TYPES OF MUSHRAKAH SHIRKAT-UL-MILK : It means joint ownership of two or more persons in a particular property SHIRKAT-UL-'AQD: This is the second type of Shirkah which means "a partnership effected by a mutual contract"  

JONATHAN JIWAN MALL

TYPES OF SHIRKAT-UL-MILK OPTIONAL SHIRKAT-UL-MILK This comes into operation through the act of parties e.g., purchase of asset with mutual consent. UNOPTIONAL SHIRKAT-UL-MILK This comes into operation without any action on the part of parties e.g., ownership of heirs on the inherited property.

TYPES OF SHIRKAT-UL-'AQD: Sharikat al-Inan A partnership of two or more to contribute the capital to finance a project and to share the profit between them. Sharikat al-Abdan A partnership of two or more to contribute their skill or craft

MUHAMMAD ALL RAZA

TYPES OF SHIRKAT-UL-'AQD Sharikat al-Wujuh A partnership of two or more without contributing capital Sharikat al-Mufawadah An equal partnership between two or more, where each contributes the same amount of capital and to share the same amount of profit and work.

CONDITIONS OF MUSHARAKAH The Conditions Of Shareholders And Partners The shareholders and partners must be qualified person to appoint an agent or to be appointed as an agent under the principle of al-Wakalah. Each shareholder is considered as a joint owner of the company and has a right to run the business for him and other shareholders when appointed as an agent. Al-Musyarakah i.e. partnership and company based business can be made between individuals or organizations.

CONDITIONS OF MUSHARAKAH The Conditions Of Capital The capital must be cash or things that can be valued by money. The amount of share is not determined to be of the same. The shareholder can transfer his share to other person. The contract of al-Musharakah can be terminated to become a contract of ownership. As for example, a Bank has agreed to finance to project together with a housing developer. At the time when the project has completed, the bank can sell his share to the developer so that it will become a sole owner of the property.

SYED WAQAS HASSAN RIZVI

CONDITIONS OF MUSHARAKAH The Conditions Of The Project The project must be lawful according to Islamic law, i.e. it must be halal. The term “shariah compliance” is widely used in current situations. The evaluation for works carried out by the partners is made on individual basis, but to be putted together so that the profit can be divided among them. The shareholder can designate the work to one of them and it can be considered as a specified term or condition of the contract. The appointed shareholder who carried out the project is held responsible under the principle of Yad Amanah (trust). In the case of his negligence he is held responsible for compensation under the principle of Yad Dhamanah (guarantee).

CONDITIONS OF MUSHARAKAH The Conditions Of Profit The shareholders must agree to a specific ratio for profit sharing upon execution of the contract. Loss sharing, except in the case of deceit or negligence, is according to percentage of shareholding.

DISSOLUTION OF MUSHARAKAH When a partnership fulfils its obligation or when its duration is expired. By mutual consent of the parties. By a request made by one of the parties which is subsequently approved by other parties. By death or incapacity of one of the parties whose heirs or their guardian decide to discontinue the partnership. The bankruptcy of the partners.

PRACTICAL IMPLEMENTATION MEEZAN BANK DUBAI ISLAMIC BANK