Mudharabah/Muqaradhah in Islamic Finance

UAE Laws and Islamic Finance

 

Mudharabah” is a kind of partnership where the investor partner gives money to another partner under a contract for the purpose of investing it in a commercial enterprise to generate profit and where the profit- sharing occurs according to the terms of the contract and the rules of Mudharabah and Sharia’h. The investment capital comes from the first partner who is called “rabb-ul-mal” or investor while the management and work is the exclusive responsibility of the other partner who is called the “mudharib” or the entrepreneur/manager.

Therefore, the Mudharabah (Profit -Sharing) is a contract with one party generally providing 100 percent of the capital and the other party providing its specialist knowledge to invest the capital and manage the investment project with the goal of generating a profit.  According to Bank Negara Malaysia, the capital may be fully or partially disbursed or…

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