 In this module, we would continue with the applications of Musharka in Islamic banking and finance. Remember, we are trying to study Islamic modes of financing and their applications in different contexts within Islamic banking and finance. In our previous module, we looked into an example of Chirkatul Mil and in this module, we would try to explain an example of Chirkatul Akht. And that would be by way of diminishing Musharka. Diminishing Musharka is a financing mode used for the likes of home financing and of course it has applications in case of car financing and similar assets. As I said, diminishing Musharka in this context is an example of Chirkatul Akht which gets established with an explicit agreement between the two parties. In case of Chirkatul Mil, there is no explicit contractual arrangement between or amongst the parties. However, in case of Chirkatul Akht, there is an explicit contractual arrangement between the partners. So, there must be a contractual arrangement between the partners before Chirkatul Akht gets established. In the diminishing Musharka-based home financing, a number of other contracts are also used notably Ijar. Remember, we have been arguing that Islamic modes of financing are not just one contract. Actually, these are arrangements which are composite in nature. I.e., in an Islamic mode of financing there is a possibility of using and combining many contracts and arrangements. And in case of diminishing Musharka, two important contracts are used together, the concept of Musharka, Chirkatul Akht and of course Ijar as I mentioned just a while ago. Let us use an example. So, there is a customer which is looking to buy a house and of course after a lot of search on Zameen.com for example, asking friends and family. This person comes to know this vendor, this person who has got a house to sell. These two people, customer and vendor, they enter into negotiations on the price and of course other aspects of payment of the price as well and they then, one of them I.e., customer then goes to a bank. So, before doing so, price is agreed between the customer and the vendor and this is something we have already explained in another context in another previous module. So, after the negotiations, the customer then approaches the bank for financing. If customer's application is accepted, the bank informs the customer of its decision and if the transaction goes ahead, then the customer and the Islamic bank jointly buy the house from the vendor. In this example, $10,000 are contributed by the customer and $190,000 are contributed by the Islamic bank which means implicitly I am telling you that the price of the house is $200,000. So, at this point, joint ownership of the house gets established. However, for practical purposes, in most of the home financing products based on diminishing Musharka, the bank remains legal owner of the property for the financing fee. From Sharia viewpoint, right from the beginning, the customer and the bank, they are joint owners. However, given the limitations in a number of jurisdictions, legally the bank remains owner of the property until the end of the financing period. So, after this one, once the house has been bought jointly by the bank and the customer, then there is another arrangement between the Islamic bank and the customer. The customer, Islamic bank actually becomes less poor. It actually leases out the house to the customer who starts living in it. And of course, when the customer starts living in it, it will have to pay the rental as well. This rental is paid in such a way that the customer is paying the rental on the portion of the house owned by the bank. Remember, this partnership got established in the beginning with $10,000 contributed by the customer and $190,000 contributed by the Islamic bank. So, whatever be the respective shares of the bank and the customer, the customer would be paying the rental according to the monthly installment paid by the customer comprise two things, at least two things I should say because in reality, there are some other considerations as well. One is rental component. The other one is price paid for buying more and more equity into the property. For example, if the monthly installment is $500, it is quite possible that $200 is the rental and $300 is the amount paid by the customer to the bank on a monthly basis to ensure that after some time at the end of the financing period, the equity of the customer becomes 100% i.e., customer pure ghar ka malik banjai. So, these monthly installments are paid for the period of financing. It could be 5 years, it could be 7 years, but in most cases actually it is 20 years or more. In case of United Kingdom where mortgages are very frequent and Islamic mortgages are also being offered by some institutions, the financing period is up to 25 years. Now once all the monthly payments have been paid by the customer and the financing period ends, the customer would become full owner of the property i.e., it would own the house 100%. At that point in time, the bank would transfer the ownership of the property to the customer. Why this is called diminishing partnership? Remember in the beginning, the customer had a very small share in the house and the bank had a very big share. With the passage of time when the customer starts paying the monthly installments, banks share in the ownership of the house gets diminished. Hence the name diminishing musharaka or diminishing partnership. So, this diminishing partnership is an example of Kirkatul Akh because it gets established with an explicit contractual arrangement between the Islamic bank and the customer.