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Abstract

This paper critically evaluates the concept of Musharakah Mutanaqisah financing and its related issues. In recent years, Islamic banks and financial institutions have frequently practised Musharakah Mutanaqisah as an investment and financing tool, along with Muzarbah, Murabahah and Ijarah. Musharakah Mutanaqisah is a partnership contract between two parties, wherein one partner gradually buys the whole property. After the formation of partnership, the transaction starts and sale and purchase of the property take place between the partners. It is imperative that this buying and selling should not be stipulated in the partnership contract. Moreover, the buying and selling agreement must not be conditional to the partnership contract. The researcher concludes with a few suggestions and recommendations to improve and get acceptance of this product in future.