This is a form of commercial partnership where two or more parties both provide capital (and real assets) as well as time and effort, commonly used in project financing and other long-term investments. The Islamic Financial Institution (IFI) is an investor in the project rather than simply being the lender.

Profits are divided as the parties see fit and as set out in the agreement at the outset. The ratio of profit for each partner must be determined in proportion to the actual profits made by the business, rather than in proportion to the levels of capital invested.

Losses are borne by the parties in proportion to their initial capital investment.

Both parties are able to take a management role in the project (unlike in a mudaraba structure) although it can be agreed between the parties that management shall only be carried out by one of them (usually the Customer). If all partners do agree to work for the partnership, each shall be treated as acting as agent for the other.