Diminishing Musharakah is commonly used for the purpose of financing fixed assets i.e. House, Car, Plant and Machinery etc. In Diminishing Musharakah, the Bank and the client participate in joint ownership of the subject property/equipment or a commercial enterprise.
Diminishing Musharakah is a joint ownership of the Bank and customer where the customer, as a lessee, uses the share of the Bank and pays rentals, and as a partner redeems the share of the Bank. As and when the repayments are made by the customer, the Bank’s share decreases and customer’s share increases accordingly until the customer’s share amounts to 100%.