Sukuk musharakah are sukuk based on musharakah, a partnership in which all parties contribute capital. The issuing vehicle, funded by the certificate holders, and the originator each put money or assets into a joint venture or a defined project. Profits are shared in an agreed ratio, while losses must be borne in proportion to each party's capital. The originator usually manages the venture, and the certificates represent the holders' undivided share in it.
The structure has been used to finance projects and business expansion, especially in Malaysia and the Gulf. In many issues the originator undertakes to buy out the holders' share over time or at maturity, in the manner of a diminishing musharakah. Scholars have objected where that purchase is fixed at face value, since it shields holders from loss; standards from AAOIFI require the price to reflect market or agreed value at the time. It differs from sukuk mudarabah, where only the investors provide capital.