This is a partnership between a financial institution and a company under which both the financial institution and the company invest in the project. The financial institution and its partner Share the profits and the losses on the basis of pre-agreed ratios. This is very similar to the way industrial and financial players pool their resources in order to launch new ventures. There is a second type of Musharaka known as diminishing Musharaka under which the company agrees to buy back the Share of the financial institution after a given period. This is very similar to a nominee arrangement.

(For more, see the Vernimmen.com Newsletter, November 2006 )

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