Nur Ad-Din

MUSYARAKAH MUTANAQISAH

RESOLUTION

At its 7th meeting on 1 December 1995, the Islamic Instrument Study Group

(IISG) passed a resolution to accept musyarakah mutanaqisah as a concept

that can be used to develop instruments for an Islamic capital market.

INTRODUCTION

Another term for musyarakah mutanaqisah is musyarakah muntahiyah bi

tamlik.

25 It is a form of partnership contract whereby the financier allows his

partner to buy assets in one payment or in instalments based on terms agreed

by both parties.26

An illustration of musyarakah mutanaqisah in the capital market is: ABC

company buys a building worth RM80 million and sells it to its customers for

RM100 million based on the principle of bai` bithaman ajil (BBA) within 120

months. As ABC company requires liquidity, it can get the project investors

involved by issuing sukuk27 based on musyarakah mutanaqisah. For that

purpose, ABC company puts in its share (the smaller part, say 10%) in

musyarakah mutanaqisah for the purchase of the building (which costs

RM80 million). The investors hold the majority part (90%). ABC company

will then buy back all the shares from the investors every month according

to the amount and duration agreed upon i.e. 120 months. This will end at

the point when ABC company owns all the shares.

ARGUMENTS THAT SUPPORT THE PERMISSIBILITY OF

MUSYARAKAH MUTANAQISAH

Musyarakah mutanaqisah is a new instrument for musyarakah products and

was introduced in Egypt.28 The majority of the current Islamic jurists are

unanimous in accepting it as one of the instruments in the capital market.29

This is because it has features that do not contradict the nas and general

principles of the Shariah. These features are as follows:

(a) `Inan company (form of partnership, in which each partner contributes

both capital and work);

(b) Promise from the financial institution to sell its share of the company

to its partners; and

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