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The Structure of Sharia Boards for Islamic Financial Institutions
The Musharaka Contract in Islamic Finance

Types of Sukuk in Islamic Finance

Sukuk al musharaka (joint venture sukuk)

The musharaka contract supports a joint venture business activity in which all partners contribute capital, labor, and expertise. The profit and losses are shared among all parties based on agreed-upon ratios.

With musharaka sukuk, the sukuk holders (investors) are the owners of the joint venture, asset, or business activity and therefore have the right to share its profits. In a musharaka sukuk, unlike sukuk based on mudaraba, a committee of investor representatives participates in the decision-making process. Musharaka sukuk can be traded in the secondary market.

The musharaka sukuk process begins when an obligator signs a musharaka contract with the SPV that specifies a profit-sharing ratio and indicates that the obligator will transfer assets (such as cash and property) to the joint venture.

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