Musharakah is a contract where parties come together for a partnership agreement based on pre agreed profit ratios on the other hand loss is shared on the basis of the amount of capital invested by each party. It can be a permanent contract or diminishing, in the permanent one there will be no mention about the time period and they can carry on the business as far as they are wish to continue and in the diminishing the financier will be getting their part of profit as well as the principal over a period of time and the ownership of that financier will be getting reduced over the time. It is usually used for a joint venture firm.

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