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musharaka (An investment partnership or joint venture compliant with Sharia in which the financing party and its client (the borrower) contribute assets (cash or property) to a joint venture and share in the profits of the joint venture in agreed percentages (usually structured so that the financing party receives its initial investment plus a return (usually calculated by a reference to a benchmark such as LIBOR plus a margin)). Losses, however, are shared in accordance with the parties' initial investment. All musharaka parties have the right to exercise control over the joint venture but it is typically managed by the client/borrower. Musharaka is widely regarded as the purest form of Islamic financing because it is based on the principles of sharing in and benefiting from risk. MichaelBurov) |
