Financing Through Musharaka: Principles and Application

Business Quest, 2004

6 Pages Posted: 2 Aug 2009

Date Written: 2004


The purpose of this article is to highlight the workings of Islamic finance in general, and Musharaka as a financial instrument in particular. Historically Musharaka was practiced by Arabs long before the advent of Islam, and is therefore considered by many scholars to be the most authentic form of Islamic contract. Musharaka is based on the profit-and-loss sharing system where two or more persons combine either their capital or labor together, and they share in the profits and losses of their venture. While the demand for Musharaka compared to other Islamic financial instruments is relatively low, it is expected that in the future to defend the system against criticism; more contracts will be established using Musharaka as the financing option.

Keywords: Musharaka, Islamic banking and finance, diminishing partnership, home loan

JEL Classification: F23, G21

Suggested Citation

Rammal, Hussain Gulzar, Financing Through Musharaka: Principles and Application (2004). Business Quest, 2004, Available at SSRN:

Hussain Gulzar Rammal (Contact Author)

University of Technology Sydney (UTS) ( email )

15 Broadway, Ultimo
PO Box 123
Sydney, NSW 2007


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