1. Mudarabah is a partnership agreement where one party provides capital to another party for investment in a business venture. Any profits are shared according to a pre-agreed ratio, while losses are borne solely by the capital provider. 2. In mudarabah used by banks, depositors act as capital providers (rabb-ul-maal) and the bank acts as the manager (mudarib). Profits from the bank's investments using depositor funds are shared between depositors and the bank according to a pre-set ratio, while the bank is only responsible for losses due to negligence. 3. At banks, depositor funds are pooled and used to finance various ventures like murab

1. 1
Committed to you
Muzarabah / Mudarabah

2. 2
Committed to you
Mudarabah
This is a kind of partnership where one partner gives money to another for investing in a
commercial enterprise.
The investment comes from the first partner who is called “Rabb-ul-Maal(‫المال‬ ‫”)رب‬
(Investor)
The management and work is an exclusive responsibility of the other, who is called
“Mudarib(‫”)مضارب‬ (Working Partner)
Profit is shared as per agreed ratio
In case of Mudarbah all losses are borne by Rabbul- Mal

3. 3
Committed to you
Authority of Partners
–Rabb-ul-Maal (‫المال‬ ‫)رب‬
•Oversee the Mudarib’s activities
•Work with Mudarib if the Mudarib consents.
–Mudarib (‫)مضارب‬
1.Ameen (Trudtee)‫امین‬ :The money given by Rabb-ul-Maal (investor)
and the assets acquired therewith are held by him as a trust.
2.Wakeel (Agent)‫وکیل‬ :He is an agent of Rabb-ul-Maal in purchasing
goods for trade.
3.Shareek (Partner)‫شریک‬ :He is a partner of Rabb-ul-Maal who shares
the profit in agreed ratio.
4.Zamin (Liable)‫ضامن‬ : If the enterprise suffers a loss due to his
negligence or misconduct, he is liable to compensate the loss.
5.Ajeer (Employee)‫اجیر‬ : If the Mudarabah becomes Void due to any
reason, the Mudarib is entitled to get a fee for his services.

4. 4
Committed to you
Rules of Mudarabah
•Capital of Mudarabah
–The capital in Mudarabah may be either cash or in kind.
•Expenses of Mudarabah
–Direct expenses are borne by the Mudarabah pool.
–Indirect expenses are borne by the mudarib.

5. 5
Committed to you
Rules of Mudarabah
•Profit and Loss Distribution
–It is necessary for the validity of Mudarabah that the parties agree, right at the
beginning, on a definite proportion of the actual profit to which each one of them is
entitled.
–Apart from the agreed proportion of the profit, the Mudarib cannot claim any periodical
salary or a fee or remuneration for the work done by him for the Mudarabah.
–The Mudarib & Rabb-ul-Maal cannot allocate a lump sum amount of profit for any
party nor can they determine the share of any party at a specific rate tied up with the
capital.

6. 6
Committed to you
Rules of Mudarabah
•Termination of Mudarabah
–If all assets of the Mudarabah are in cash form at the time of termination, and
some profit has been earned on the principal amount, it shall be distributed
between the parties according to the agreed ratio.
–If the assets of Mudarabah are not in cash form at the time of liquadation, they
will be sold and liquidated so that the actual profit may be determined.
–If there is a profit, it will be distributed between Mudarib and Rab-ul-Maal.
–If no profit is left, Mudarib will not get anything.

7. 7
Committed to you
Mudarabah in Banking
Deposits - The Bank as Mudarib
Profit from the Mudaraba activity is shared between the Bank (as Mudarib)
and the investment account holder (as Rabb-ul-Maal) in a pre-agreed ratio
The Bank does not bear any loss but remains responsible for negligence
The Bank may receive from its investors compensation (Mudarib fees) in
return for management of their funds
The Bank is bound to return the capital to the investors after deducting any
losses or Mudarib fees at the time of winding up the contract

8. 8
Committed to you
Mudarabah in Banking
•Characteristics of Mudarabah in Banking:
–On agreeing to become an account holder, the customer enters into a relationship based
on Mudarabah with Bank.
–Mudarabah is liquidated constructively at the end of each month.
–Withdrawal of Balance by account holder is considered as sale of his investment to
Mudarib or other account holder.

9. 9
Committed to you
Mudarabah in Banking
–Fund Utilization
•The bank allocates the funds received from the customers to a deposit pool.
•These funds from the pool are utilized to provide financing to customers under Islamic
modes that include, but are not restricted to, Murabaha and Ijarah.
–This deposit pool creates two different relationships:
•Relationship between investors inter se, which is Shirkah or Partnership.
•Relationship of all the investors with mudarib, which is Mudarabah.

10. 10
Committed to you
Mudarabah in Banking
–Weightages
•The Investment Pool will operate on Musharakah basis and different categories of
depositors in the Investment Pools will be assigned different weightages based on:
–Investment tenure
–Profit payment option
–Amount tiers
•These profit weightages are announced at the beginning of each month.
•The bank can also participate in the Investment Pool (as an investor) in any proportion,
however the weightages assigned to the bank will not be greater than the highest
weightages assigned to the depositor in the Investment Pool.

11. 11
Committed to you
Mudarabah in Banking
–Profit Distribution:
•The bank calculates the profit of the deposit pool every month.
•Gross Income (Return) of the pool will be calculated by taking all the assets booked
upto the beginning of the next month as well as assets booked/investments made during
the month by utilizing the funds from the Investment Pool.
•The Gross Income of the pool will be announced on a monthly basis. The profit will be
calculated by 5th working day of each subsequent month for the previous month.
•The Gross Income will be shared between the bank (as Mudarib) and Depositors
(Rabb-ul-Maal) in a predetermined ratio (%) of the actual profit earned.

12. 12
Committed to you
Mudarabah in Banking
–Ratio of Profit:
•This ratio of profit for bank & Investment Pool (for depositors) is announced
–at the beginning of the month and
–is available at the website of the bank or
–can be obtained from the bank upon request.
–Loss Sharing
•In case of any loss, it will be shared by the members of Investment Pool in ratio of their
investment.

13. 13
Committed to you
JazakAllah o Khair
‫خیرا‬ ‫ہللا‬ ‫جزاک‬