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The word is driven from Arabic word Shirkah whose meanings are sharing. It is a joint venture where every partner bears the risk as well as enjoys the profits.

Investment & Management

Musharakah (cash in) is when clients buy certificate of Musharakah. Musharakah (cash out) is generally of two kinds “Musharakah” and “Diminishing Musharakah”.

Management of Musharakah

Musharakah can either be managed by all the partners or according to the following conditions;

1. Every partner has a right to take part in its management.

2. The sleeping partner shall be entitled to the profit only to the extent of their investment and the ratio of profit allocated to them not exceeds the ratio of his investment.

3. However, if all the partners agree to work for the joint venture, each one of them shall be treated as the agent of the other in all matters of business. Any work done by one of them in normal course of business shall be deemed as authorized by all the partners.

Profit Distribution

1. Profit/loss can’t be kept lump sum as it resembles with the Jewish interest patterns.

2. Profit/loss will be distributed according to the percentage decided and the in accordance with the work done by the partners.

3. Losses should be shared proportional to the ratio of investment made by each partner .

Securities Provided From The Government To The Investors

The government has put many limitations to Modaraba companies to make it sure that the investment of the client is secure that’s why the Modaraba companies are restricted by law that they will get themselves approved by SECP and certificate of Musharakah will be offered as per the fixed patterns of the religious board. Below are the upsides and safeguard of the Musharakah certificates.

1. These certificates are en-cashable and transferable at any time.

2. These certificates are Similar to certificate of investment of the leasing companies whose maturity ranges from 3 years to five years or more. The profit on certificate of Musharakah is supposed to be paid quarterly but general industry practice is profit is shared per year.

3. These certificates of Musharakah are similar to the shares trading of the company and are extremely liquid.

4. The Modaraba are restricted by law to mention the actual credit rating of all the certificates which are being offered and publication of quarterly profits and loss account in two national daily news papers.

5. Security and Exchange commission has imposed strict reporting requirement on the Modarabas. .

Restrictions for Borrowers

1. These funds have to be used for the specific purpose mentioned in the agreement with the Modaraba and prohibited to be used for some other purpose.

2. This investment is an aggregate investment means that the clients will inject the same amount of funds which have been provided by Modaraba. If the Modaraba offers Rs.5 million investment, the client will also inject Rs.5 million making the aggregate investment a total of Rs.10 million.

3. The client will, by law, provide the complete details of the facilities he has availed from different financial institutions.

4. Client will neither disburse any dividend nor avail any facility from a financial institution(s) without the prior written permission of the Modaraba.

5. The client will not change his paid up capital, accumulated reserve, un-appropriated profits (except on the basis of annual audited accounts) without the consent of Modaraba.

6. The client shall provide all the documents required from the Modaraba when required and restricted by the law that he shall meet all the standards provided by the standard bank of Pakistan. These documents include financial statements, bank accounts information, clients complete details, personal guarantee and the security.

7. The client shall furnish the financial information at the end of the financial year and will pay the Modaraba its due profit which is based on the projected rate of return.

8. Payments shall be treated as provisional to be adjusted on final accounts being prepared for the whole accounting year.

9. This Agreement shall not be deemed to create a partnership or company and in no event has the Client any authority to bind the Modaraba. In no event shall the Modaraba be liable for the debts and obligations of the Client incurred for other purposes, except as stipulated in this Agreement .

Termination of Musharakah

Musharakah will be terminated in the following conditions.

1. If the purpose of forming the shirkat has been achieved.

2. Any one partner decides to leave the Musharakah - every partner has the right to terminate the Musharakah at any time after giving prior notice to the partners.

3. A partner dies – in this case, his legal heirs will have the option to continue with the Musharakah or draw his share of investment.

4. A partner becomes instance or otherwise incapable of effecting commercial transactions.


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Principle Office:

First IBL Modaraba.
87- Aurangzeb Block,
New Garden Town,
Lahore (Pakistan).

Tel:+92(42)359 521 48-50
Fax:+92(42)359 521 47

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First IBL Modaraba.
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Tel:+92 21 3432 8610
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Email: ibl@firstibl.com