Diminishing Musharaka

Diminishing Musharaka is a Shariah-compliant home financing structure where bank and client co-own property with the client gradually purchasing the bank's share through rental payments that include equity acquisition components.

Ownership StructureEvolution
InitialBank 75%, Client 25%
After 5 yearsBank 60%, Client 40%
After 10 yearsBank 40%, Client 60%
After 15 yearsBank 15%, Client 85%
MaturityBank 0%, Client 100%
Payment ComponentsAllocation
Rental portionBank's profit on their share
Acquisition portionBuy bank's equity
Total paymentFixed monthly amount
Ownership transferProgressive with each payment
Comparison to Other Islamic ProductsDistinction
MurabahaOwnership immediate, fixed markup
IjaraOwnership at end only
MusharakaProgressive ownership acquisition

Related Terms

Islamic MurabahaIjara (Islamic Lease-to-Own)Shariah-Compliant Loan Islamic FinanceIslamic Finance, Ijara

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