Shirkah
Also known as: Shirkat, Islamic Partnership, Sharikah, Shirkah al-Aqd
- partnership
- equity
- joint-venture
- CORE_ISLAMIC_CONTRACTS
Definition
Shirkah (also Sharikah) is the generic Arabic term for partnership or joint enterprise in Islamic jurisprudence — the parent concept encompassing all forms of business association permissible under Shariah. Classical fiqh divides Shirkah into two main categories: Shirkah al-Milk (co-ownership of assets acquired by inheritance, gift, or joint purchase, without a partnership contract) and Shirkah al-Aqd (contractual partnership, which is the basis for Islamic finance instruments). Shirkah al-Aqd is further subdivided into: (1) Shirkah al-Inan — the most common form, where each partner contributes capital and both participate in management, with profits shared as agreed and losses proportional to capital; (2) Shirkah al-Mufawadah — an equal partnership where parties have identical capital contributions, profit shares, liabilities, and management authority; (3) Shirkah al-Abdan (or Shirkah al-A'mal) — a labour partnership where craftsmen or professionals pool their skills and share income from contracts; and (4) Shirkah al-Wujuh — a creditworthiness partnership where trusted traders purchase on credit and share profits, without contributing physical capital. AAOIFI Shariah Standard No. 12 provides modern codification of Shirkah including Musharakah (the modern finance-focused variant) and joint ventures. The IOF platform's Musharakah, Mudarabah, and Diminishing Musharakah rails are all specialisations of the Shirkah framework.
Primary Sources & Standards
- ID
- shirkah
- Status
- active
- Version
- 1.0.0
- Effective
- 2024-01-01