Diminishing Musharikah is a form of Musharikah with an additional feature of decreasing ownership of Modaraba. As against a normal Musharikah where ownership ratio does not change, Modaraba gradually sells its share of asset to the other over a period of time. Till the complete sale of share, the Client enjoys right of use against periodic rent to the Modaraba for use of its share.
Morabaha is a non-participatory mode of Islamic financing where the Modaraba sells the asset required by its client to the client on cost-plus basis. The asset is first purchased by the Modaraba and the Modaraba incurs the risk of any loss or damage to the asset as long as the asset remains under its ownership. Upon sale of the asset, payment by the client of the sale price may be deferred.
Under this facility, a client takes on rent property, vehicle or any other real asset belonging to the Modaraba. The Modaraba transfers the right of use of the asset to the client, while retaining the ownership of the asset. The client pays periodic rent to the Modaraba for the use of the asset. Basis for rentals can be fixed as well as floating. Any change in rental may be made through mutual consent.