Diminishing Musharakah (DM) Financing at Bank-e-Millie Afghan (BMA)

Diminishing Musharakah (DM) is a Sharia-compliant financing solution offered by BMA, designed to support businesses in acquiring assets or expanding operations while adhering to Islamic financial principles. This financing method is based on joint ownership between the Bank and the Customer, where the Customer gradually purchases the Bank’s share over time until full ownership is transferred. DM is a flexible, ethical, and transparent financing option for businesses in need of capital for their growth.

How Diminishing Musharakah Financing Works

• Customer request: The Customer submits a financing Application to the Bank. The Bank evaluates the request based on the Customer's cash flow, security offered, and financial capacity.
• Agreement to purchase Shares: Once the Customer’s Application is approved, the Bank purchases a Share in the business or property as per the Agreement. The Bank and Customer jointly own the asset.
• Two-Part Agreement: a) Leasing Agreement: In the first Agreement, the Bank leases its portion of the business or property to the Customer. The Customer pays rent based on the Bank’s Share in the asset. b) Promise to purchase: Customer promise to purchase the Bank Share, the Bank gradually sells its Share to the Customer over time. As the Bank’s Share reduces, the Customer’s ownership stake increases. The rent also decreases in line with the reduction in the Bank’s Share.
• Gradual ownership transfer: As the Customer continues to purchase the Bank’s Share, the Ownership gradually shifts from the Bank to the Customer. The Customer’s Share increases, and the Bank’s share decreases until Full Ownership is transferred.
• Final Ownership transfer: At the end of the agreed period, the customer fully owns the asset. The Bank’s role is completed, and the financing relationship concludes.

Benefits of Diminishing Musharakah Financing

• Sharia-compliant: The structure of DM financing fully adheres to Islamic principles, ensuring that all transactions are ethical and permissible.
• Flexible repayment: The financing is based on the Customer’s ability to repay, with payments being tied to the gradual transfer of ownership.
• Ownership growth: Over time, as the Customer makes payments, their ownership in the asset increases, eventually leading to full ownership.
• Lower Rent over time: As the Bank’s Share in the asset decreases, the Rent also decreases, making the financing progressively more affordable for the Customer.
• Maximum duration of five years: The maximum duration for the Diminishing Musharakah financing is five years, allowing for manageable long-term financing.

Eligibility Requirements for Diminishing Musharakah Financing

To qualify for DM Financing, businesses must meet the following requirements:

• Company License: A valid and active Company License.
• Company’s Articles of Association (AoA): A copy of the company’s Articles of Association.
• Identification of key personnel: Copies of the ID cards for the Company’s President, Deputy President, and Shareholders.
• Two year Audited Financial Statements: Audited Financial Statements for the last two years, prepared by one of the Bank’s affiliated audit firms.
• Three year Projected Financial Statements: A projection of the Company’s Financial Performance for the next three years.
• Official request: A formal Request on the Company’s letterhead, signed and sealed by the President or Vice President.
• Board Resolution: A Resolution from the Company’s Board of Directors (Shareholders' approval) for obtaining financing and appointing a person authorized to sign all relevant documents.
• Bank Statement: A statement showing the Company’s banking transactions for the last 12 months. 

Why Choose Diminishing Musharakah Financing?

• Ethical financing: DM Financing follows Sharia principles, ensuring all transactions are fair and just.
• Asset ownership: As the Customer makes payments, they gradually increase their Ownership in the Asset, eventually becoming the Full Owner.
• Transparent terms: The Lease and Sale Agreements are clear and fully outlined, with decreasing Rent as the Bank’s Share diminishes.
• Flexible payment structure: Payments are tailored to match the Customer’s financial capacity, and the financing period can extend up to five years.