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Mudharabah: Profit Sharing Explained

Mudharabah is an Islamic financing contract where one party provides capital to another party who acts as an entrepreneur or manager. Profits from the venture are shared between the parties according to their agreement, while losses are borne solely by the capital provider. The entrepreneur suffers only the loss of their effort if the venture is unsuccessful. It differs from a conventional fixed deposit in that it is an investment partnership where both partners share risks and rewards, rather than a guaranteed return.

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Farith Mohayyaddin
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125 views6 pages

Mudharabah: Profit Sharing Explained

Mudharabah is an Islamic financing contract where one party provides capital to another party who acts as an entrepreneur or manager. Profits from the venture are shared between the parties according to their agreement, while losses are borne solely by the capital provider. The entrepreneur suffers only the loss of their effort if the venture is unsuccessful. It differs from a conventional fixed deposit in that it is an investment partnership where both partners share risks and rewards, rather than a guaranteed return.

Uploaded by

Farith Mohayyaddin
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd

AL - MUDHARABAH

DEFINITION
Literally : Profit or increase
Technically : can be defining as a joint-
venture profit sharing contract whereby
one party is the provider of capital
while the other is the entrepreneur

CHARACTERISTICS

The profit will be shared between parties
whom involved in the contract according
to the terms of their agreement.
The losses will be borne by the capital
provider who is the financier of the
project.
The entrepreneur suffers of their fruitless
effort.

Differences between Mudharabah and
conventional Fixed Deposit
MUDHARABAH IN
CONVENTIONAL IS..
INVESTMENT PARTNERSHIP
A business organization in which two or more individuals
manage and operate the business. Both owners are equally
and personally liable for the debts from the business.


Investment partnership means any partnership which has
never been engaged in a trade or business and substantially
all of the assets (by value) of which have always consisted
of--
(I) money,
(II) stock in a corporation,
(III) notes, bonds, debentures, or other evidences of
indebtedness, etc

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