| Islamic financial principles stress the importance of profit and loss share agreements given the impermissibility of using conventional applications of interest in financial transactions. One of the most islamically acceptable techniques is that of Diminishing Musharaka. According to the diminishing musharaka concept, the Islamic bank and its partner/customer participate in the joint ownership of a business/property. The share of the bank is further divided into a number of units and it is understood that the partner/customer will purchase the units of the share of the bank one by one periodically, thus increasing his own share until all the units of the bank are purchased by him so as to make him the sole owner of the business/property. These cases describe the working of the Diminishing Musharaka mode of Islamic Finance.
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