THE BAHRIANS TUTOR ACADEMY

MONEY&BANKING
MUSHARIKAFINANCING
Musharikainanarrangementoftemporarypartnershipbetweenthebankanditsclient.
Inthisarrangementprofitsaresharedinpreagreed
proportionbutloss,itany,isborne
bythecapitalonly.
TheMusharikafinancingSchemelaunchedbytheNationalizedandnowprivatized
Commercialbankshasbeendesignedtomeettheworkingcapitalrequirementsoftrade
andindustry.SincethefinancingofMusharikaisbeingdonefromthePLSdeposits
banksareverycareful yexaminingthatthelineofbusinessoftheborrowershouldnot
berepugnanttosharia.
Thismodeoffinancingcanberesortedtoandappliedtofinancingtransactionsofunder
mentionedcategories.
a)Workingcapitalfinancingforlarge,mediumandsmal scale
industries.
b)Workingcapitalfinancingfortradeandcommerce.
c)Financingtohousebuildingfinancecorporation.
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d)Dairyandpoultry.
e)Orchardsincludingnurseries.
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f)Forestry.
Thecapitalprovidedbythebanksshalbeintheformofacheckingaccountlikeacash
creditoroverdraftaccountinwhichthedepositsandwithdrawls
offundsareatthe
convenienceoftheborrowingcompany.Whetherapubliclimitedorprivatelimited.
Musharikaproposalsarebeconsideredandnegotiatedonlywiththose,clientswho
maintainproperbooksofaccountsandpreparefinalaccountsregularly.
Management:Musharikaagreementstipulatesthattheentiremanagementor
operationoftheMusharikabusinessshalremainwiththeborrowingcompanyandthe
banksshalevaluateandmonitoritsperformance.
Thebankaregibingduerecognitiontothemanagerialskil sandgoodperformanceof
theborrowingcompanyandaportionoftheprofitisbeingawardedtothecompanyas
ManagementFeeormanagementBonus.SharingofProfitsharingratiosaredeterminedin
accordancewiththeprofitprojections
compatiblewiththecompanyspastperformanceorinthelightoffutureplanskeeping
inviewthegeneraleconomicclimate.Thecapitalprovidedbythebanksisnotapartof
companysequitybutinvestmenttotheworkingcapital,therefore,theprofitwilbe
sharedstrictlyinproportiontothecapitalofthecompany.

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