This financing is based on the principle of Al-ljarah. By definition, Al-ljarah is a contract where the benefits/use of an asset is transferred by the owner (lessor) to the lessee at an agreed price/rental amount for an agreed period of time or Ijarah period. During the period the Ownership of the assets remains with FIM.
In Arabic it is called Shirkat-ul-Mutanaqisa. Diminishing Musharaka is just a Musharaka with an additional feature of decreasing ownership of one party. This differs from normal Musharaka, Where ownership ratio does not change. The closest term in conventional finance is redeemable capital.
Murabaha is a non-participatory mode of Islamic financing where the FIM sells the asset required by its client to the client on cost-plus profit basis. The asset is purchased by the FIM and carries the risk of any loss or damage to the asset as long as the asset remains under its ownership.
A Salam, (sometimes referred to as Salaf) is a short-term agreement in which a financial institution makes full prepayments for future delivery of a specified quantity of goods on a specified date.
A Salam is primarily a deferred delivery sale contract usually used for commodity finance. It is similar to a forward contract where delivery is in the future in exchange for spot payment. To mitigate the asset risk, a financier can enter into a parallel salam.
Established in 1994, floated under the Modaraba Ordinance of 1980. Popular Islamic Modaraba is a multipurpose, perpetual and multi dimensional Modaraba, It is managed by Popular Islamic Modaraba Management Company (Private) Limited. In year 2013 Popular Group of Industries acquired this Modaraba from Honorable Peshawar High Court . It is listed on the Pakistan Stock Exchanges Limited and a member of NBFI & Modaraba association of Pakistan. As an Islamic Financial Institution providing financial facilities in accordance with Shariah constraints.