Wednesday, 3 October 2012

Comprehensive note on Musharika and Modaraba

The bank and customer join the temporary partnership and carry on the business. The bank and customer contribute the capital according the agreed ratio. Profit is also distributed according the agreed ratio. It is an important mode of Islamic financing. Following are the important features of Musharika.

1. Business Operation :-
All the business is operated by the customer. He is responsible for organizing the business. The bank only evaluates and monitors the business. The customer invests his capital and also uses his skill and knowledge.

2. Case Of Profit :-
In case of profit, bank shares the profit according the agreed ratio.

3. Case Of Loss :-
In case of loss in Musharika financing the bank will share the loss according to the ratio of fund invested in the business. The banks share of fund will be the actual amount financed by it.

4. Hire Purchase :-

Basically Musharika investment was introduced to cover the working capital of the business. Now banks are allowed to invest the money for the fixed capital.

5. Safety Of Capital :-

In Musharika financing bank obtains security from the party for the safety of his capital.

6. Insurance :-
The security which is obtained by the bank, it is also insured. The expenses of insurance are paid by the party.

7. Selection Of Party :-
Before financing the loan bank selects the parties keeping in view their previous reputation and profit record for 2 to 3 years. It is also checked that non of the director has been a defaulter of the bank.Under Musharika system the finance is approved by the bank head office.

Islamic economic system in interest less. People do the business on profit and loss sharing. In Modaraba business some persons participate with their money while other with their, efforts and skill. If profit earned it is distributed among the entrepreneur and financier according the agreed ratio.
      In case of loss financier shares the loss according the capital invested in the business.

Note :- If losses occur due to negligence of manager or breach of agreement then he will bear the losses. A modaraba (Manager) is a legal person. Modaraba companies ordinance was issued in 1980.

Registration :-
Modaraba company can be registered under the ordinance and it should fulfill the conditions mentioned in the ordinance. There are two kinds of modaraba company, one is multipurpose and other is specific purpose.

Following are the important conditions for Modaraba companies :

1. According To Islamic Shariah :-
The first and important condition for the Modaraba company is that its business should be operated according the law of shariah. It should be Halal.

2. Permission From Religious Board :-
One religious board is established which gives clearance that business is Halal. There are three members of the board. One is high court judge and two are religious scholars.

3. Prohibition Of Loan :-
Any director or the officer or their relatives can not take the loan from the Modaraba company. Even they can not get the loan against the security of the company.

4. Mobilization Of Resource :-
Modarba company generate its resources by selling its shares or Musharika certificates. Some Modaraba have the "Income Note" which are another mode of finance.

5. Modaraba Companies In Pakistan :-
There are large number of Modaraba and leasing companies which are working in Pakistan. But the turn.


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