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Sukuk al-musharaka
Practical Law Glossary Item 3-500-7349 (Approx. 3 pages)
Glossary
Sukuk al-musharaka
- The two partners in the joint venture/partnership are:
- the entity seeking financing (originator) that contributes the assets or funds; and
- a special purpose vehicle (SPV) that contributes cash (the proceeds of a sukuk issuance).
- The originator and the SPV enter into a management agreement pursuant to which the originator operates the assets and invests the cash in accordance with the musharaka agreement and Sharia. For example, the originator cannot invest the funds in prohibited (haram) products and services such as alcohol, gambling, or pork products. If the musharaka is a separate legal entity, the management agreement is entered into by the musharaka.
- The profits from the musharaka are shared between the SPV and the originator in accordance with pre-agreed percentages. Losses, however, are shared in accordance with the partners' initial investments.
- The SPV uses its portion of the profits to make payments to the sukuk holders.
For more information on sukuk al-musharaka, see Islamic Finance Deal Structure: Sukuk al-musharaka.
For more information on Islamic finance in the US, see Practice Notes:
For more information on Islamic finance in the UK, see Practice notes: