Diminishing Musharkah
Diminishing Musharakah (Musharakah Mutanaqisah) is a partnership in which both parties jointly own an asset through Shirkat-ul-Milk (joint ownership). POICL-IFD rents out its share in the asset to the customer. Over time, the customer gradually purchases POICL-IFD's share in the asset, ultimately becoming the sole owner. This is commonly used in machinery, home, and vehicle financing.
Core Shariah Requirements:
- Joint ownership between the financier and the client.
- Clearly defined capital contribution of each party.
- Separate and independent agreements (partnership, lease, and purchase).
- Gradual transfer of the financier's share to the client over time.
- Loss borne in proportion to ownership.
- Ownership-related risks borne by each partner according to their share.
- Asset must be used for Shariah-compliant purposes.
