GUIDELINES FOR CONDUCTING ISLAMIC BANKING Section I Introduction to Islamic Banking

Mudaraba:

Profit, if any, is divisible between the Sahib-Al-Maal (Business) and the Mudarib (Bank) at a
predetermined ratio, while loss, if any, is borne by the Sahib-Al-Maal.

Musharaka:

The profit is divided between the bank and the investment client at a predetermined ratio. Loss, if any,
is to be borne by the bank and the investment client according to capital ratio.

Losses, if any, will be borne by the depositor unless the loss is due to the negligence by the bank in
managing the depositors' funds.

4.1. Definition of Musharaka: Musharaka is a Shariah compliant mode of investment wherein the bank
and the client jointly provide the capital. Here no prefixed profit is earmarked like in Bai-Murabaha or
Bai-Muajjal. Profit, if any, is distributed as per agreement between the client and the bank while the
loss, if any, is shared according to capital ratio.

4.4. The Bank shall, thereafter, receive the equity portion of the client and after completion of
documentation shall make payment against the import liability and all expenses related to it as per the
Musharaka agreement. If there is profit, bank shall receive its share of profit as per agreement and in
case of loss, shall bear the same according to capital ratio

4.5. Fixation of liability in case of loss: If loss is incurred after performing all duties and responsibilities as
per agreement, then the loss would be borne by the bank and the client according to capital ratio. But if
the loss is incurred due to carelessness, negligence or breach of any condition by the client, then the
client would be liable to bear the loss.

5.3. In this case, profit, if any, is distributed between the bank and the client as per the agreed ratio and
loss is fully borne by the Bank.