3 Objections On Musharkah
3 Objections On Musharkah
3 Objections On Musharkah
Answer:
Musharakah:
Musharakah is the partnership in a business venture between two or
more partners up to 20 partners in maximum. However, partnership
does not mean that all partners will be sharing their resources, assets
or finances in equal proportions. There can be different proportions of
participation like one partner may be investing 30% and other 70%.
But in Islamic finance there are still some reservations on this mode of
financing. In view of Maulana Taqi Usmani, there are mainly 4
objections made upon Musaharakah namely:
Risk of Loss
Dishonesty
Secrecy of the Business
Client’s unwillingness to share Profits
They are discussed below in detail.
Risk of Loss:
In this mode of financing, the financier is exposed to risk more. In case
of banks and financial institutions, this risk is born by the depositors
and they feel reluctant towards depositing or investing their money in
business ventures which affects the business and economy at national
level since their money is not utilized in any kind of business activity.
The risk of loss cannot be eliminated thoroughly but only minimized
through portfolio diversification.
Dishonesty:
In case of negligence or lack of monitoring of the business activities, the
clients may show some dishonesty by either not disclosing profits or
pretending to have faced losses that will deprive the bank of recovering
its interest and as well as sometimes the principal amount issued to
them for business activities. A well-designed auditory system can serve
as the solution to this problem.