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| Diminishing Musharika Equipment |
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| Defination |
It is a contract through which the bank and its client
participate in the joint ownership of a property. The share of the Bank
is further divided into a number of units and it is agreed that the
client will purchase the bank’s share periodically, thus increasing
his own share until all the units of the bank are purchased by him so
as to make the client the sole owner of the property.
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| Parties in Diminishing Musharakah |
| Bank |
(In joint partnership with its customer) |
| Partner |
(Bank’s customer) |
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| Diminishing Musharakah Pricing |
The buying (per unit price) for the
buyer is determined at the beginning of the partnership. The monthly payments
paid by the buyer includes this price plus rental charges since the buyer
is already in possession of the commodity and is using it. |
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| Process Flow |
1- Diminishing Musharakah
Agreement (Entails that the Bank and the client are joint owners
of Equipment, enjoying ownership rights in undivided Equipment and that
both are jointly responsible for all the expenses related to ownership.
Under this agreement the client shall purchase units of Bank’s ownership
in the Equipment at the Buy Out price that shall correspond to the cost
value of the Equipment). |
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2- Lease Agreement
(The client gets exclusive right to use the Equipment in consideration
of a rental). |
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3- Undertaking to Purchase
(The client will purchase the Musharakah units from the bank). |
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| Common Features |
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Request of customer for starting
a new project/expanding business/buying equipment for specific purpose. |
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Bank and the client shall jointly
contribute funds to purchase the equipment in the pre-agreed ratio. |
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The client will pay rentals for using MCB’s
share of equipment. |
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The bank will have to share all the obligations of being the co-owner. |
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Appropriate collateral / securities can be
obtained as per mutual consent |
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Insurance / Takaful will continue to execute |
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