Somaliland Banking Association (SLBA)
Islamic Banking Products Central Bank Approved Standard

Musharakah (Joint Venture Partnership)

Musharakah is an equity partnership contract where the bank and the client co-invest capital into a venture, sharing profits by agreement and losses by capital ratio.

4 min read Revised: October 2026 Ref: SLBA-SHR-MSH-2026
Musharakah (Joint Venture Partnership)
Core Consumer Protection Mandate

Profits in Musharakah are shared according to the agreed contract ratio, while financial losses are shared strictly in proportion to capital contributed.

What is Musharakah?

Musharakah is a contract based on partnership between the bank and the other entity (Joint venture) whereby they both share profit and loss. A percentage of the profit is determined based on the ratio of investment and mutual agreement by both parties.

Key Principles of Musharakah

Unlike conventional debt lending, Musharakah is true equity financing. Both parties contribute capital to a business, infrastructure project, or commercial development.

Loss Allocation Rule

Under Sharia law, while profit sharing can be negotiated based on management contribution, any financial losses must strictly correspond to the percentage of capital contributed by each partner.

Types of Musharakah

  • Permanent Musharakah: The bank participates in the equity and profits of the company indefinitely.
  • Diminishing Musharakah (Musharakah Mutanaqisah): The customer gradually purchases the bank’s share of equity over time until achieving 100% full ownership.

Official 4-Step Consumer Dispute Resolution Protocol

If your financial transaction, fee deduction, or mobile banking request has not been satisfactorily addressed by your bank:

  1. Step 1: Direct Branch Inquiry — Lodge an official written inquiry with your commercial bank's branch manager and retain your ticket reference number.
  2. Step 2: Internal Bank Ombudsman — If unresolved within 5 business days, escalate to the accredited bank's Chief Compliance Officer or Customer Care Desk.
  3. Step 3: SLBA Consumer Secretariat — Submit a formal mediation petition via the SLBA Consumer Dispute portal (somalilandbanking.org/contact) with relevant transaction receipts.
  4. Step 4: Central Bank Regulatory Oversight — Final statutory arbitration through the Central Bank of Somaliland Supervision & Financial Integrity Division.