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This lecture is for Islamic Banking course. It was delivered by Shoaib Ahmad at Babasaheb Bhimrao Ambedkar University. This course is to clear concept of Banking system. It includes: Diminishing, Musharaka, Financier, Schedule, Fuqaha, Ownership, Purchase, Basis, Approaches, Islamic, Bank
Typology: Slides
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This is a contract between a financier and a beneficiary in which the two agree to enter into a partnership to own an asset, but on the understanding that the financier will gradually sell their share to the beneficiary in accordance with an agreed schedule. The price at which the shares will be sold should ideally be determined at the time of sale, taking into consideration the market value of the asset at that time.
Example of Diminishing Musharakah
Year Client-to- bank ownership ratio
Client’s share in the rent (Rs)
Bank’s share in the rent (Rs)
Purchase of units in ownership by the client
Payment made to the bank
0 30:70 30,000 70,000 -^ 70, 1 40:60 40,000 60,000 1,000,000^ 1,060, 2 50:50 50,000 50,000 1,000,000^ 1,050, 3 60:40 60,000 40,000 1,000,000^ 1,040, 4 70:30 70,000 30,000 1,000,000^ 1,030, 5 80:20 80,000 20,000 1,000,000^ 1,020, 6 90:10 90,000 10,000 1,000,000^ 1,020, 7 100:0 100,000 0 1,000,000^ 1,000,
Purchase of a taxi on Musharaka
Basis
Conditions for Diminishing Musharakah
applied to a diminishing partnership. Therefore, it is not permitted that the contract of diminishing partnership includes any clause that gives any of the parties a right to withdraw their share in the capital.
should bear all of the cost of insurance or maintenance on the grounds that they will eventually own the subject matter of the partnership.
a. actual loss defined as the difference between the market price mentioned in the undertaking, if any, not being the opportunity cost;
b. any gain on sale of property shall be shared by the co-owners in proportion of their respective investment at the time of such sale.