• This Practice Note provides a high-level overview of the different structures of a Musharaka.

Whilst Musharaka has not been among the most popular type of Islamic finance agreements, its popularity amongst banks in the GCC has started to increase in recent years due to its particular effectiveness in the area of real estate development. Musharaka, in essence, constitutes a partnership agreement entered into between the Islamic bank and its customer for the purpose of sharing profits and losses in proportion to their respective, contractually-determined, shares in the musharaka enterprise. Musharaka is typically divided into two sub-categories:

1. “shirkat al mulk” in which the Islamic bank and the customer jointly purchase and acquire a specific property (most often a real estate), and

2. “shirkat al aqd” in which the Islamic bank and the customer jointly establish or acquire a commercial enterprise.