- profit sharing transaction in the form of Mudharabah and Musyarakah;
- leasing transaction in the form of Ijarah or lease and purchase transaction in the form of Ijarah Muntahiyah bit Tamlik;
- sale and purchase transaction in the form of Murabahah, Salam, and Istishna’;
- lending transaction in the form of Qardh; and
- leasing transaction in the form of Ijarah for multi service financing;
Musyarakah Transaction of investment from two or more fund and/or goods owners to conduct a specified business activity in compliance with sharia principles, with a division of profit between those parties based on ratio agreed in advance while division of loss will be based on capital proportion of each party.
Feature and Mechanism
- Bank and customer shall act as business partners and provide funds and/or goods in order to finance a specified business activity;
- Customer shall act as business manager and Bank being business partner will be able to participate in the management of business activity in accordance with tasks and authorities agreed in advance such as to review and to request evidence related to business performance report based on the reliable supporting documents;
- Profit sharing ratio from the fund management shall be specified in the agreed ratio in advance;
- The agreed ratio of profit sharing may not be changed in the course of investment period, unless upon mutual agreement of both parties;
- Financing based on Musyarakah contract will be provided in the form of cash and/or goods and not in the form of receivables or claim;
- In the event where financing based on Musyarakah contract is provided in the form of cash, the amount must be clearly stated;
- In the event where financing based on Musyarakah contract is provided in the form of goods, the concerned goods must be appraised based on market value (net realizable value) and the amount must be clearly stated;
- The terms of financing based on Musyarakah contract, fund repayment and profit sharing ratio shall be determined in accordance with the agreement between Bank and customer;
- Repayment of financing based on Musyarakah contract is conducted in two ways: by installment or bullet payment based on the term of financing based on Musyarakah contract;
- Profit sharing is conducted based on the business report with the reliable supporting document; and
- Bank and customer shall bear any loss on business activity on pro rata basis in accordance with the portion of capital of each party.
1) For Bank
- as one of the forms in financing
- earning revenue in the form of profit sharing by referring to the revenues of the business under their management.
- fulfilling the need of business capital through bank partnership system.
Risk Analysis and Identification
- Credit risk due to customer’s default
- Market Risk due to the movement of exchange rate if financing based on Musyarakah agreement is provided in foreign currency.
- Operational Risk due to internal fraud such as incorrect record of outstanding value, bribery, inconformity of tax reports (intentionally), errors, manipulation and marking up in accounting and reporting.