DIMINISHING MUSHARAKA

INTRODUCTION
Another type of Musharakah, created in the recent past, is 'Diminishing Musharakah'. As
indicated by this idea, a lender and his customer take and participate either in the joint
responsibility for property or equipment, or in a joint business undertaking. The share of the
agent is further isolated into various units and it is comprehended that the customer will buy the
units of the offer of the lender one by one periodically, in this manner expanding his own
particular offer till every one of the units of the lender are obtained by him to make him the sole
proprietor of the property, or the business venture, as the case may be. The Diminishing
Musharakah based on the above concept has taken different shapes in different transactions.
Some examples are given below:
It has been utilized for the most part as a part of house financing. The customer needs to buy a
house for which he doesn't have satisfactory funds. He approaches the lender who consents to
take an interest with him in purchasing the required house. 20% of the cost is paid by the
customer and 80% of the cost by the financier. Along these lines the agent claims 80% of the
house while the customer possesses 20%. Subsequent to buying the property mutually, the
customer uses the house for his private prerequisite and pays rent to the agent for utilizing his
offer as a part of the property.
In the meantime the share of agent is further separated in eight equivalent units, every unit
speaking to 10% responsibility for house. The customer guarantees to the agent that he will buy
one unit following three months. Accordingly, after the first term of three months he buys one
unit of the offer of the agent by paying 1/10th of the cost of the house. It diminishes the offer of
the agent from 80% to 70%. Consequently, the rent payable to the lender is likewise decreased to
that degree. Toward the end of the second term, he buys another unit expanding his offer in the
property to 40% and lessening the offer of the lender to 60% and considerably diminishing the
rent to that extent. This procedure goes ahead in the same manner until after the end of two

years, the customer buys the entire offer of the lender lessening the offer of the agent to "zero"
and expanding his own particular offer to 100%.
This course of action permits the agent to claim rent as indicated by his extent of proprietorship
in the property and in the meantime permits him periodical return of a piece of his central
through buys of the units of his offer.

PERSPECTICE OF AUTHOR AND BOOKS ABOUT DIMINISHING MUSHARAKAH:

House financing on the basis of diminishing Musharakah:
The proposed arrangement is composed of the following transactions:
To make joint proprietorship in the property (Shirkat-al-Milk). Giving the offer of rent to from
lender to customer. Customer make promise to purchase the units of share of the financier.
different stages of actual purchase of the units. Modification of the rental indicated by the
remaining offer of the agent in the property. Give me a chance to examine every element of the
course of action in a more noteworthy subtle element.
Joint ownership in the property is the first step in above arrangements. It has now been clarified
that 'Shirkat-al-Milk' (joint possession) can appear in changed ways including joint buy by the
gatherings. This has been explicitly permitted by all schools of Islamic law. Thus no complaint
can be raised against making this joint possession.
The second a portion of the game plan is that the lender rents his offer in the house to his
customer and charges rent from him. This game plan is likewise above board in light of the fact
that there is no distinction of supposition among the Muslim legal scholars in the passability of
renting one's unified offer in a property to his accomplice. In the event that the unified offer is
rented out to an outsider its passability is a state of contrast between the Muslim legal advisers.
Imam Abu Hanifah and Imam Zufar are of the perspective that the unified offer can't be rented
out to an outsider, while Imam Malik and Imam Shafi'i, Abu Yusuf and Muhammad Ibn Hasan
hold that the unified offer can be rented out to any individual. Be that as it may, so far as the
property is rented to the accomplice himself, every one of them are consistent on the legitimacy
of 'Ijarah'.
The third step in the aforementioned plan is that the customer buys diverse units of the unified
offer of the agent. This exchange is additionally permitted. On the off chance that the unified
offer identifies with both land and fabricating, the offer of both is permitted by the Islamic
schools. Essentially if the unified offer of the building is expected to be sold to the accomplice, it

is additionally permitted consistently by all the Muslim legal advisers. Be that as it may, there is
a distinction of conclusion on the off chance that it is sold to the outsider.
It is clear from the prior three focuses that every one of the exchanges said herein above is
permitted in essence, however the inquiry is whether this exchange may consolidated in a
solitary plan. The answer is that if every one of these exchanges have been joined by making
every one of them a condition to the next, then this is not permitted in Shari'ah, on the grounds
that it is an all-around settled standard in the Islamic legitimate framework that one exchange
can't be made a pre-condition for another. Notwithstanding, the proposed plan recommends that
as opposed to making two exchanges contingent to one another, there ought to be uneven
guarantee from the customer, firstly, to take offer of the agent on lease and pay the concurred
rent, and besides, to buy diverse units of the offer of the lender of the house at distinctive stages.
This leads us to the fourth issue, which is, the enforceability of such a guarantee.
It is for the most part trusted that a guarantee to accomplish something makes just an ethical
commitment on the promisor which can't be implemented through courts of law. Be that as it
may, there are various Muslim law specialists who opine that guarantees are enforceable, and the
court of law can urge the promisor to satisfy his guarantee, particularly, in the setting of business
exercises. Some Maliki and Hanafi legal advisers can be refered to, specifically, who have
announced that the guarantees can be authorized through courts of law in instances of need. The
Hanafi legal advisers have received this perspective with respect to a specific deal called 'baibilwafa'. This bai-bilwafa is an uncommon plan of offer of a house whereby the purchaser
guarantees to the vender that at whatever point the last gives him back the cost of the house, he
will exchange the house to him. This game plan was in vogue in nations of focal Asia, and the
Hanafi law specialists have opined that if the resale of the house to the first dealer is made a
condition for the starting deal, it is not permitted. Then again, if the first deal is influenced with
no condition, yet in the wake of influencing the deal, the purchaser guarantees to exchange the
house at whatever point the merchant offers to him the same value, this guarantee is satisfactory
and it makes an ethical commitment, as well as an enforceable right of the first dealer. The
Muslim legal scholars permitting this course of action have construct their perspective in light of
the guideline that"(the guarantee can be set aside a few minutes of need).

Regardless of the possibility that the guarantee has been made before influencing the first deal,
after which the deal has been influenced without a condition, it is additionally permitted by
certain Hanafi legal scholars.
One may raise a protest that if the guarantee of resale has been taken before going into a real
deal, it for all intents and purposes sums to putting a condition on the deal itself, in light of the
fact that the guarantee is comprehended to host been gone into between the gatherings at the
season of offer, and accordingly, regardless of the fact that the deal is without an express

condition, it ought to be taken as contingent on the grounds that a guarantee in an express term
has gone before it.
This protest can be replied by saying that there is a major distinction between putting a condition
in the deal and making a different guarantee without making it a condition. On the off chance
that the condition is explicitly said at the season of offer, it implies that the deal will be
legitimate just if the condition is satisfied, which means in this way that if the condition is not
satisfied in future, the present deal will get to be void. This makes the exchange of offer
dependent upon a future occasion which might possibly happen. It prompts vulnerability
(Gharar) in the exchange which is completely disallowed in Shari'ah.
Alternately, if the deal is with no condition, however one of the two gatherings has guaranteed to
accomplish something independently, then the deal can't be held to be unexpected or contingent
with satisfying of the guarantee made. It will produce results regardless of whether or not the
promisor satisfies his guarantee. Regardless of the fact that the promisor pulls out of his
guarantee, the deal will stay viable. The most the guarantee can do is to urge the promisor
through court of law to satisfy his guarantee and if the promisor can't satisfy the guarantee, the
guarantee can assert genuine harms he has endured due to the default.
This makes it clear that a different and free guarantee to buy does not render the first contract
restrictive or unforeseen. Subsequently, it can be upheld.

On the premise of this investigation, lessening Musharakah may be utilized for House Financing
with taking after conditions:
The statement of joint buy, renting and offering distinctive units of the offer of the agent ought
not to be entwined up in one single contract. On the other hand, the joint buy and the agreement
of lease may be joined in one archive whereby the lender consents to rent his offer, after joint
buy, to the customer. This is permitted in light of the fact that, as clarified in the pertinent part,
Ijarah can be influenced for a future date. In the meantime the customer may sign uneven
guarantee to buy distinctive units of the offer of the agent occasionally and the lender may
embrace that when the customer will buy a unit of his share, the rent of the remaining units will
be diminished as needs be.
At the season of the buy of every unit, deal must be affected by the trading of offer and
acknowledgment at that specific date.
It will be ideal that the buy of distinctive units by the customer is affected on the premise of the
business sector estimation of the house as predominant on the date of procurement of that unit,
yet it is likewise admissible that a specific cost is concurred in the guarantee of procurement
marked by the customer.

Diminishing Musharakah for carrying business of services:

The second case given above for diminishing musharakah is the joint buy of a taxi keep using so
as to run for gaining pay it as a procured vehicle. This course of action comprises of the
accompanying fixings
Doing joint proprietorship in taxi as Shirkah al-Milk as officially expressed this is permitted in
Shari'ah. Musharakah in the salary produced through the administrations of taxi.
Buy of distinctive units of the offer of the lender by the customer. This is again subject to the
conditions officially point by point on account of House financing. In any case, there is a slight
contrast between House financing and the course of action recommended in this second
illustration. The taxi, when utilized as an employed vehicle, typically deteriorates in worth after
some time, along these lines, devaluation in the estimation of taxi must be remembered while
deciding the cost of distinctive units of the offer of the agent.
Diminishing Musharakah in trade:
The third example of diminishing Musharakah as given above is that the financier contributes
60% of the capital for launching a business of readymade garments, for example. This
arrangement is composed of two ingredients only:
In the first place, the arrangement is simply a Musharakah whereby two partners invest different
amounts of capital in a joint enterprise.
Different units of share is purchased by client of financier. This may be as a different and free
guarantee by the customer. The necessities of Shari'ah in regards to this guarantee are the same
as clarified on account of House financing with one imperative contrast. Here the cost of units of
the agent can't be settled in the guarantee to buy, on the grounds that if the cost is altered in
advance at the season of going into Musharakah, it will for all intents and purposes imply that the
customer has guaranteed the essential contributed by the lender with or without benefit, which is
entirely disallowed on account of Musharakah. Along these lines, there are two choices for the
agent about altering the cost of his units to be bought by the customer. One alternative is that he
consents to offer the units on the premise of valuation of the business at the season of the buy of
every unit. On the off chance that the estimation of the business has expanded, the cost will be
higher and on the off chance that it has diminished the cost will be less. Such valuation may be
did as per the perceived standards through the specialists, whose character may be settled upon
between the gatherings when the guarantee is agreed upon. The second choice is that the lender
permits the customer to offer these units to any other person at whatever value he can, yet in the
meantime he offers a particular cost to the customer, which means consequently that on the off
chance that he finds a buyer of that unit at a higher value, he might offer it to him, however in the

event that he needs to offer it to the agent, the last will be pleasant to buy it at the cost altered by
him already.

Albeit both these alternatives are accessible as indicated by the standards of Shari'ah, the second
choice does not appear to be practical for the agent, in light of the fact that it would prompt
infusing new accomplices in the Musharakah which will aggravate the entire plan and vanquish
the motivation behind diminishing Musharakah in which the lender needs to recover his cash
inside of a predetermined period. In this manner, with a specific end goal to execute the goal of
diminishing Musharakah, just the first alternative is applicable.
PERSECTIVE OF EMAN BANK WHICH IS THE DIVISION OF SILK BANK:
Bank diminishing musharakah or diminishing musharakah by an Islamic bank is financing taking into
account a constrained reason association in which resource of the organization is additionally rented to
the customer amid the disposition of the exchange. The choice of renting the resource for an outsider is
dependably there yet rarely worked out. Besides, though the bank keeps a part for itself on the money
related and lawful sides of the exchange, obligation regarding the commonsense matters is assigned to the
customer. What's more, to wrap things up, the bank likewise looks for shields to secure its hobbies against
any wrong-doing or installment default by the customer. Diminishing musharakah may taking into
account sharikah al-milk or sharikah al-aqd. On account of sharikah al-milk-based lessening musharakah,
specialized issues emerge in the occasion of thankfulness or deterioration in the estimation of the
fundamental resource. That is, the way to make a stipend for expansion in business sector estimation of
the benefit particularly when the customer may have officially made a few installments to build his value
stake. While the bank administration may be thoughtful to the customer, the bank's shareholders and
particularly the contributors may not find that to their greatest advantage. Thus, what can anyone do
market estimation of the basic resource falls pointedly and the customer calls for definite settlement as
indicated by the said business sector esteem? Such issues are stayed away from with the decreasing
musharakah by banks taking into account sharikah al- aqd, contractual association.

COMPARISON OF BOOKS, AUTHORS PERSPECTIVE BETWEEN BANKS

PERSPECTIVE:
When we look at the scholarly point of view and bank's viewpoint so we find that in the process of
diminishing there is not too much similarity. In any case, which bank we picked the EMAN bank it is new
in the business sector which is the division of silk bank which is conventional however EMAN is Islamic
bank and the two cases they bargain in reducing musharakah they are in housing financing and machinery

financing and it is fundamentally the same which lets us know in book and what Shariah said the banks
are in good shape and they are doing what Islamic law said yet in banks the procedure is minimal
entangled in reports in light of the fact that to begin with, they need to fulfill their selves that the item
lessening musharakah they are giving the Is he is qualified or he has solid pay energy to diminish the
offer of banks time by time so the banks are exceptionally engaged to giving the item to client.

CONCLUSION:
The scholars agreed that it is the best to implement DM partnership for house financing or
Machinery financing where by both assists can be least out to agreed rental. Joint ownership of
house or machinery accepted by all school of Islamic Jurisprudence since the financer sells its
shares to the customer.
DM is considered to be an appropriate mode to finance collective investment due to benefit to
the respective parties.
In my conclusion I think the Bankers perspective is to earn periodical profit all the year round.
I think the Partners perspective is to encourage the partner to participate in hallal investment. It
releases the customers ambition to individually own the asset/ project in the short run when the
bank with draws gradually.
DATAFLOW DIAGRAMS:

JOINT OWNERSHIP

BANK

RENT
MUSHARAKAH

CUSTOMERS

 The customer approaches the bank with the request for Project/Machinery/House
financing.
The bank enters into a Musharakah (joint ownership) agreement with the customer and
both of them pay their respective shares to the seller of the asset.
Client promises to purchase Banks share (units). Over the tenure of transaction with the
help of undertaking to purchase.

JOINT OWNERSHIP

BANK

Gradual Transfer of
Ownership

MUSHARAKAH

CUSTOMERS

Clients promises to purchase Banks share over the tenure of transaction with the help of
under taking to purchase.
Customer pays rent for the use of banks share in the property.
Client purchase the units every month via a separate offer and acceptance every month
and will eventually become the owner of the property.

 Ownership of the asset is gradually transferred to the customer upon payment of asset
price. With help of a sale transaction between bank and customer at the end of each
period