Mudarabah

Mudarabah (Arabic: مضاربة) is an Islamic profit-sharing partnership where one party (Rab al-Maal, the capital provider) supplies the entire capital and another party (Mudarib, the managing partner) contributes expertise and labour. Profits are shared between both parties at a pre-agreed ratio; losses, however, are borne solely by the capital provider — the Mudarib loses only their time and effort. This asymmetric loss-sharing reflects the different nature of each party's contribution. Mudarabah underpins Islamic banking deposit products: depositors act as Rab al-Maal and the bank as Mudarib. Two-tier Mudarabah structures (bank as both Mudarib to depositors and Rab al-Maal to entrepreneurs) form the core of Islamic bank balance sheets. Governed by AAOIFI Shariah Standard No. 13. Also known historically as Qirad in pre-modern Islamic jurisprudence.