Silent partnership, also known as mudarabah or qirad, is an Islamic business contract where one party provides capital to another party who uses it to conduct business activities. Any profits generated are shared according to a predetermined formula agreed upon by both parties, while losses are solely borne by the capital provider. There are differing views among Islamic schools of jurisprudence on whether restrictions can be placed on how the business is conducted. The contract is considered legally valid as long as certain conditions are met, such as the capital being monetary and present for use.

1. Silent Partnership
Khairunnisa Haji Abdullah

2. Definition
There are two Arabic names given to this form of
partnerships;
•Mudarabah in the language of Iraq. Mudarabah
highlights that both the capitalist and the
entrepreneur share in profits
•Qirad in the language of Hijaz. Qirad referring to the
act that the capitalist gives part of his capital and
part of his profit to the entrepreneur.

3. • In a silent partnership contract, the owner of
capital gives it to worker to deal on their
behalf, and profits are shared according to an
agreed-upon formula.
+
Owner of the capital worker do deal on their behalf
PROFIT
$$$$$
I , hereby agreed with
the said formula of
distributing the profits.
signature,
(-----------)

4. Legality of Silent Partnership
• The silent partnership is permitted as what
has been agreed upon among jurists.
• Surah Al Jumuah, 10;
“… and when the prayer is finished, then you
may dispersethrough the land and seek of the
bounty of Allah.”

5. • On the authority of Suhayb that the Prophet
Muhammad PBUH said,
“There is blessing in three transactions: credit
sales, silent partnership, and mixing wheat
and barley for home, not for trading.”

6. The Conditions
• Conditions pertaining to partners
it is not necessary for both partners, the
capitalist and the entrepreneur to be Muslims.
• Conditions pertaining to capital
1. The capital must be monetary
2. The capital must be present

7. TYPES OF MUDARABAH
• Restricted mudarabah is that the capitalist may
specify a particular business for the entrepreneur
(mudarib) or he may leave it open for the
entrepreneur to undertake whatever business he
wishes.
• Unrestricted mudarabah is where no restrictions
concerning persons from whom the entrepreneur
has to buy and to whom has to sell, time, place or
type of trade are imposed on the entrepreneur.

8. • According to hanafi & hanbali schools in
restricted mudarabah, if the capitalist imposes
certain conditions, the entrepreneur is not
allowed to violate them.
• The condition said may be in terms of
particular trade, place or time.

9. • the Maliki and Shafie jurists say that mudarabah
should not be restricted to a certain place, time
and type of trade or to certain trading partners.
WHY?
 Imposing such restrictions will limit the
entrepreneur’s choice and may result in certain
disabilities for him.
The original purpose of the mudarabah is that the
capital is entrusted to the entrepreneur to be
invested in his discretion.

10. Syukran