Musharakah Rail

Musharakah Rail

Equity-participation partnership contract endpoints for Islamic finance.

Overview

The Musharakah rail provides:

• Partnership contract creation and management
• Diminishing Musharakah (Musharakah Mutanaqisah) support
• Profit/loss sharing calculation
• Partner buyout workflows

Musharakah is a partnership contract where two or more parties contribute capital and share profits according to a pre-agreed ratio, while losses are borne in proportion to capital contribution.

Endpoints

Create Musharakah Contract

POST /v1/rails/musharakah/contracts

const contract = await iof.musharakah.create({
  project_description: "Residential property - Villa 12, Palm Gardens",
  contract_subtype: "diminishing",
  total_capital: 1000000,
  currency: "USD",
  partners: [
    {
      id: "institution",
      capital_contribution: 800000,
      profit_share_ratio: 0.6,
    },
    {
      id: "cpty_abc123",
      capital_contribution: 200000,
      profit_share_ratio: 0.4,
    },
  ],
  diminishing_schedule: {
    buyout_frequency: "quarterly",
    buyout_amount: 20000,
    duration_months: 120,
  },
});

Response:

{
  "id": "msh_xyz",
  "type": "musharakah",
  "subtype": "diminishing",
  "status": "DRAFT",
  "total_capital": 1000000,
  "currency": "USD",
  "partners": [
    {
      "id": "institution",
      "capital_contribution": 800000,
      "current_share": 0.8,
      "profit_share_ratio": 0.6
    },
    {
      "id": "cpty_abc123",
      "capital_contribution": 200000,
      "current_share": 0.2,
      "profit_share_ratio": 0.4
    }
  ],
  "created_at": "2024-01-15T10:30:00Z"
}

Get Musharakah Contract

GET /v1/rails/musharakah/contracts/:id

List Musharakah Contracts

GET /v1/rails/musharakah/contracts

Execute Musharakah Contract

POST /v1/rails/musharakah/contracts/:id/execute

Buyout Partner Share

POST /v1/rails/musharakah/contracts/:id/buyout

Record Profit Distribution

POST /v1/rails/musharakah/contracts/:id/distribute-profit

Contract Types

Type	Description
permanent	Ongoing partnership with no end date
diminishing	One partner gradually buys out the other’s share
project	Partnership for a specific project with defined end

Contract Status

Status	Description
DRAFT	Contract created, pending review
PENDING_SHARIAH_REVIEW	Awaiting Shariah board approval
SHARIAH_APPROVED	Approved by Shariah board
ACTIVE	Partnership active
COMPLETED	Full buyout completed or project end
TERMINATED	Partnership dissolved early

Shariah Compliance

• Profit sharing ratios must be agreed at inception (can differ from capital ratios)
• Loss sharing must be proportional to capital contribution
• All partners share in the risk of the venture
• Capital contributions must be clearly defined
• In diminishing musharakah, the buyout promise is a separate undertaking

Webhooks

Event	Description
musharakah.contract.created	Contract created
musharakah.contract.executed	Partnership started
musharakah.profit.distributed	Profit distributed
musharakah.share.buyout	Share buyout completed
musharakah.contract.completed	Full buyout or project end

Standards

• AAOIFI Shariah Standard No. 12 - Sharikah (Musharakah)
• IFSB Standards on Capital Adequacy for Musharakah

Next Steps

• Murabaha Rail - Cost-plus financing
• Ijarah Rail - Islamic leasing
• Contracts Rail - General contract management