The Structure and Elements of a Musharaka Transaction

Overview

  • This Practice Note provides a high-level overview of the structure and elements of a Musharaka transaction.

Practical Guidance

Introduction to musharaka—a profit and loss sharing instrument of Islamic finance

A fundamental principle of Islamic finance is that of “no profit without risk”, i.e., the idea that no person should make a gain or profit unless they are contributing an element of risk. This principle is best illustrated when applying Islamic instruments of profit and loss sharing. For more information on this principle, see Key Principles of Islamic Finance.