The group presentation is telling about the general description on Al Mudharabah (profit sharing partnership) transaction, which is classified under one of the Islamic Banking transactions.

1. Al Mudharabah
(Profit Sharing Partnership)
Members :
Nor Siti Atikah bt Abdul Razak
Nor Rukhila bt Rosli
Nurul Ashikin bt Mohammad Sohaimi
Siti Nabilah bt Hashim
Ummu Shahirah bt Mohd Azhar

2. Definition
• Literally:
• Derived from the phrase “dharaba fi al-ard” which means to make a journey and it is called this
because the agent (entrepreneur) gets profit by virtue of his hard work and efforts in
performing long journeys.
• Technically:
• A contract or a partnership where one provides the capital and the other the entrepreneurship
with the profit being shared among them with a predetermined condition
• Partnership in profit whereby one party (rabb al-mal) provides capital and the other party
(mudharib) provides labor.

3. Characteristic of Mudharabah

4. Legal Evidence
Al Quran :
i. “… and others who travel in the land seeking of the bounty of Allah” ( Al-Quran,
Al- Muzammil : 20)
ii. “… but when the prayer is ended, they disperse abroad in the land and seek
Allah’s grace “ (Al-Quran, Al-Jumu’ah : 10)
iii. “… there is no blame on you in seeking bounty from your Lord.. “ ( Al-Quran, Al-
Baqarah : 198)
• Although this verses do not directly address the legality of mudharabah, they have
been interpreted to include those who travel for the purpose of trading and
seeking permissible income.

5. Legal Evidence
Hadith:
• Reported By Hakim Bin Hizam that he had stipulated to a man that if he gave
him certain asset to be utilized for Muqaradah (Mudharabah, Qiradh) , he must
not use it to purchase livestock, or carries it (travel) through the sea, or drop by
at the oasis, if the man committed any of the above, he is considered to be the
guarantor of my property

6. Pillars of MudharabahPillars of Mudharabah

7. Conditions of MudharabahConditions of Mudharabah

8. 1.1. Conditions of SighahConditions of Sighah
• It is constitute of offer and acceptance.
• For example, A who has money says to B, “Take this money as
mudharabah, and what God gives in profit will be divided
between us…” (And he specifies a certain profit sharing ratio).
• Can be done verbally, in writing or through any means of
communication that is acceptable by both contracting parties.

9. 2.2. Conditions of Contracting PartiesConditions of Contracting Parties
• Involve
i. capital provider (rabbul mal)
ii. the entrepreneur (mudharib)
• Must be qualified persons under the law to enter the contract
of mudharabah.
• Eg: sound mind.

10. 3.3. Conditions related to Subject MatterConditions related to Subject Matter

11. a)a) Conditions of WorkConditions of Work
• The work or business venture under Mudharabah must be
conducted solely by the entrepreneur (mudharib). It is not legal if
the capital provider (rabbul mal) was also required to conduct
the daily operation.
• The project must be legal and permissible (halal).
• All the expenses will be taken from the capital provided that is
not more than the justified expenses required in the venture.

12. b)b) Conditions of CapitalConditions of Capital
1. Must be in the form of money and not commodities since
commodities fluctuate in price and cause uncertainty and
ignorance.
2. The capital must be clearly specified, determined and known at
the time of the contract.
3. Must be available cash-present during the conclusion of
contract.
4. Must be delivered to the possession of the mudharib entirely.

13. c)c) Conditions of ProfitConditions of Profit
1. The distribution of profit must be determined
proportionally between the capital provider and the
entrepreneur.
2. The pre-determined profit must be in ratio form or
percentage and not in fixed amount.
3. Allowed to be different ratios at different situations.

14. Al Mudharabah
Al – Mutlaqah
vs
Al Mudharabah
Al - Muqayyadah
Al Mudharabah Al - Mutlaqah Al Mudharabah Al - Muqayyadah
Al Mudharabah Al-Mutlaqah is
unrestricted Mudharabah which is the
capital provider (rabbul mal)
authorizes the entrepreneur
(mudharib) to act completely at the
latter’s option in all business matter.
Al Mudharabah Al-Muqayyadah is restricted
Mudharabah which is the capital provider
makes certain limitations to the activities to
be conducted by the mudharib with regards
to the capital given.
Rabbul mal only invests money as
capital to the mudharib for the
business, mudharib utilise the capital
without involvement of rabbul mal.
Rabbul mal invests money as capital to the
mudharib for the business and also has
authority to make conditions or restrictions
related to investment and business
operations.
Example :
Kuwait Finance House (KFH)
Mudharabah Current Account-i
Example :
Bank Islam Ziyad NDI-i – the form of
Islamic Negotiable Instrument (INI)

15. Mudharabah
vs
Musharakah
Mudharabah Musharakah
The capital is financed by one party,
which is the capital provider or the
owner of the business
The capital is financed by all the
shareholders according to the proportion
agreed upon by all parties
The capital must be in the form of
cash money
Any type of property that could normally be
assessed and have certain commercial
value could be considered as an acceptable
source of capital. Example; intellectual
capital
The entrepreneur will be the only one
that will conduct the actual business.
The capital provider is not allowed to
jointly work with the entrepreneur.
All the shareholders have the right to
work and contribute their skills, knowledge,
experience e and expertise in the company
The monetary loss will be solely borne
by the capital provider while the
entrepreneur will only suffer from a
fruitless effort without having to bear
all the capital losses
The monetary loss will be jointly borne by all
the shareholders according to the ratio and
proportion of their respective share in the
partnership

16. Termination of Mudharabah

17. ISSUES ON MUDHARABAH
Subtitle

19. RISKINESS
1 Rabbul maal provide capital. 1. mudarib act as
entrepreneur.
2. Bear any loss incurred. 2. Bear no loss.
* violation towards small depositors and investors.
Rabbul
maal
M
udarib

20. STIFF COMPETITION
1 non- interest bearing 1 interest bearing.
2.revenue is not guaranteed. 2.revenue is guaranteed.
3.less profit but halal 3.high profit but doubtful.
* Customers prefer conventional due to high returns.
Mudharabah Conventional

21. LONGER FINANCING PERIOD
1 long-term financing. 1.short-term financing.
2. late return. 2. quick return.
* Customers prefer Ijarah & murabahah due to quick return.
Mudharabah Ijarah &
Murabahah

22. NOT TECHNICALLY ACHIEVABLE
1.Rabbul maal provide capital. 1. mudarib act as
entrepreneur.
2.Bear any loss incurred. 2. Bear no loss.
* Expertise is required to monitor long-term project so
that it runs smoothly.
Rabbul
maal
M
udarib
Expertise

23. MUDHARABAH INVESTMENT
ACCOUNT

24. SPECIAL INVESTMENT
ACCOUNT (SIA)
1. Not open to public
2. PSR commonly negotiated.
3. Occur between bank and
government link companies (GLC).
DIFFERENCES BETWEEN GIA &
SIA
GENERAL INVESTMENT
ACCOUNT (GIA)
1. Open to public.
2. PSR decided by the bank.
3. Could be between bank and
entrepreneur or customer and
provider of capital.

25. MUDHARABAH SAVINGS
ACCOUNT
MUDHARABAH
CURRENT ACCOUNT

26. Conclusion
i. There are many products in practice under mudharabah concept.
( project financing, investment account, etc )
ii. To avoid public to make illegal activities for generate more money.
iii. Possible to take care of society and social justice
“He who sleeps on a full stomach whilst his neighbour goes hungry is not one of us”
(Saying of Prophet Muhammad PBUH)