Analysis on asset acquisition using diminishing musyarakah model

Asset acqusition is one of the many strategic ways to expand the business. One of the concept that can be applied is by using diminishing musyarakah concept. The application of diminishing musyarakah can help Muslims to avoid lending that based on riba since it based on syariah principle. Diminishing musyarakah can be defined as an arrangement of agreement whereby the bank as a capital provider allows entrepreneurs to buy its equity by installments where the profit and losses will be shared on the agreed ratio. The objective of this paper is to determine the net present value for diminishing musyarakah model in calculating the investment performance. It is found that the diminishing musyarakah model can be adapted in determining the investment perfomance for asset acquisition using net present value. Thus, this paper may encourage the financial institution and Islamic banks to use diminishing musyarakah concept in managing their investment performance.