Mudarabah (Profit-Sharing)
Partnership where one provides capital and another management, sharing profit or loss.
Detailed Description
Mudarabah (Profit-Sharing)
What is the primary role of the rabb-ul-mal in a Mudarabah agreement?
The rabb-ul-mal is the investor or capital provider who contributes funds to the venture and bears the financial risk.
How are profits shared in a Mudarabah arrangement?
Profits are distributed based on a pre-agreed ratio established before the partnership begins.
What distinguishes restricted Mudarabah from unrestricted Mudarabah?
Restricted Mudarabah imposes specific restrictions on fund usage, while unrestricted Mudarabah allows the mudarib to use capital freely.
What happens to losses in a Mudarabah agreement?
Losses are borne solely by the capital provider, the rabb-ul-mal, unless there is negligence or misconduct by the mudarib.
What is a key regulatory body for Mudarabah in Islamic finance?
The Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) provides guidelines for compliance with Sharia law.