43 Pages Posted: 11 Jan 2012
Date Written: January 10, 2012
Mudarabah/مضاربۃ is an Arabic term of business law. Grammatically, the word Mudarabah/مضاربۃ is on the scale of Mufa`alah/مفاعلۃ . It is from the chapter of mufa`al/باب مفاعل which signifies mutual action of two persons. In business, mudarabah is a kind of business where there are two parties, otherwise qualified to enter into a contract, joining in business in the manner that one gives his capital (ra’s al-mal/) رأس المال and the other his services (i.e., the abilities, the capabilities, the capacity, the skill and the doing of all sorts of work required by such business termed as effort or labour or mihnat/محنۃ ) and they (both the partners in Mudarabah/مضاربۃ business) share the profit according as to their mutual lawful agreement. However, in case of any loss in the business it shall be borne by the person who invests capital. The jurists also call it Qirad قِرَاض. It is one of the kinds of Partnership (Shirkat/شرکۃ or Shirakat/شراکۃ MUDARABAH/مضاربۃ is a financial arrangement. It is a contract. Law of Pakistan recognizes it and defines the rights and obligations of the contracting parties and also of the third parties who are directly affected by it. Its ideal nature is that in which there is no interest open or hidden and it achieves the goal of Islamic egalitarian philosophy. The Constitution of Pakistan, 1973 also mentions in its Article 38 (f) that the State shall eliminate riba as early as possible. This is one of the Principles of Policy given in Chapter 2 (Articles 29 to 40) of the Constitution.
Keywords: Mudarabah, Capital, Agent, Entrepreneur, Profit Sharing, Mudarabah within mudarabah, Islamic Banking. Interest free financing
Suggested Citation: Suggested Citation
Mughal, Justice (R) Dr. Munir Ahmad, Mudarabah/مضاربۃ In the Light of the Holy Qur’An and Sunnah/سُنَّۃ of the Messenger of Allah (صَلَّی للهُ عَلیۡہِ وَ آ لِہٖ وَسَلَّم) (January 10, 2012). Available at SSRN: https://ssrn.com/abstract=1982779 or http://dx.doi.org/10.2139/ssrn.1982779