In Diminishing Musharaka contract, a financier and his client participate either in the joint ownership of a property or an equipment, machinery or vehicle. The share of the financier is further divided into a number of units and it is understood that the client will purchase the units of the share of the financier one by one periodically, thus increasing his own share till all the units of the financier are purchased by him so as to make him the sole owner of the property, equipment, machinery or vehicle, as the case may be.
Creation of partnership
Implementing the relevant rules Musharaka
Redemption of one partner shares by another
The arrangement is composed of the following key activities
- To create joint ownership in property/asset.
- Giving share of the Modaraba to client on rent.
- Promise of client to purchase units/share of the Modaraba.
- Purchase of the Modaraba's units.
- Adjustment of rental according to share of the Modaraba in property/asset.