How Is Running Musharakah an Alternative to Traditional Financing?

A fast-paced world demands a ready-to-go person who can match the pace day in and day out, but other than just matching the pace, there are tons of other, more important obligations that one needs to fulfill. For example, finding out the correct way to bank is one of the many obligations that a Muslim has, as Islam has prohibited interest.

To make things easy, Habib Bank Limited (HBL) introduced the Islamic way of banking, which follows the principles of Shariah. Therefore, each act that the system now does should be Shariah compliant. Other than just allowing peace of mind to the consumers, this banking system also aims to change how things work in Pakistan gradually but effectively entirely.

What is Musharakah?

Originally coming from the Arabic language, it means sharing. Whereas, in the business context or enterprise meaning, it means a joint business or venture where every partner becomes an equal holder in profit and loss, as well. Because the world doesn’t function without interest these days, or it has been led to believe like that, musharakah has emerged as the ultimate solution.

Types of Musharakah

There are two major types of Musharakah:

Shirkat-al-milk

Shirkat al milk can be easily understood as a partnership by ownership.

Shirkat-al-milk is further divided into an optional partnership or otherwise known as Ikhtiary

The other type is known as the compulsory partnership, which might also be known as Ghair Ikhtiary

Shirkat-al-Aqd

Shirkat al Aqd can, whereas, be understood as a partnership by contract or a venture that is commercially joint. Shirkat-al-Aqd is further divided into:

Shirkat al Amwal – Where each member of the partnership pours some investment into the business
Shirkat al Amaal – Where each member offers their services to the enterprise and serves customers, and in the end, divides the revenue generated
Shirkat al Wujuh – Where each member of the partnership uses their reputation and face as the main component and then earn profit via the revenue generated because of the goods sold

Running Musharakah as an alternative

Habib Bank Limited (HBL) has introduced Running Musharakah as the alternative to traditional financing, which runs on the basis of Shirkat al Aqd. It is a Shariah-compliant facility that allows consumers to change the number of funds as and when required without having to submit documents.

This facility is available to consumers with a declared Halal business where both the partners can decide on what basis and at what rate they will share the profit. No fixed assets can be bought from Running Musharakah (RM). Instead, RM will be used to finance the customer’s operational activities, and both will share the profit and loss.

RM has made banking and financing easier for people who believe in Islamic banking. As a result, many businesses can boom, and others can start through this fruitful initiative.