Diminishing musharakah: Using a viable kind of equity financing instrument in managing the capital requirement of business

Mohd Nasir bin Mohd Yatim

Department of Finance and Economic, College of Business and Accounting, Universiti Tenaga Nasional. Muadzam Shah. Pahang. Malaysia.

E-mail: nasir@uniten.edu.my .

Accepted 4 September, 2009

   Abstract

This applied study was aimed at giving an insight to practitioners and academicians as well as investors and interested parties in understanding the characteristics and processes of an interesting “shari’ah-compliant” equity financing vehicle. Therefore, effort in identifying the related “shari’ah” concept and tenets as well as principles was closely studied in depth in order to justify on the validity of the instrument for the users of such financing facility. Related available documents were scrutinised in detail. A simple model of this form of vehicle was then proposed in this study. Thus, contributions in term of an innovation can offer a new knowledge to the practitioners as well as academicians and the interested parties of this financing instrument. Qualitative method of research and descriptive approach to research were applied in this study as they were appropriate in looking into the research issue understudied.  Capitalising on the explored and examined instrument shall then become the basis in innovating more sophisticated models for multiplicity of instruments to be made available in the capital market both for domestic and foreign markets [Mohd Nasir, 2009]. In conclusion, this study contributed in term of an innovation initiative aimed at sustaining economic growth to up-hold the on going concern of enterprises during economic recession turbulence.

Key words: Shari’ah-compliant, equity financing vehicle, diminishing musharakah, and musharakah investment model.