Question # 4

Defination of mudarabah
"Mudarabah" is a special kind of partnership where one
partner gives money to another for investing it in a
commercial enterprise. The investment comes from the first
partner who is called "rabb-ul-mal", while the management
and work is an exclusive responsibility of the other, who is
called "mudarib.
There are 2 types of Mudarabah namely:
1. Al Mudarabah Al Muqayyadah: Rab-ul-Maal may specify a
particular business or a particular place for the mudarib, in
which case he shall invest the money in that particular
business or place. This is called Al Mudarabah Al
Muqayyadah (restricted Mudarabah).
2. Al Mudarabah Al Mutlaqah: However if Rab-ul-maal gives
full freedom to Mudarib to undertake whatever business he
deems fit, this is called Al Mudarabah Al Mutlaqah
(unrestricted Mudarabah). However Mudarib cannot, without
the consent of Rab-ul-Maal, lend money to anyone. Mudarib
is authorized to do anything, which is normally done in the
course of business. However if they want to have an
extraordinary work, which is beyond the normal routine of the
traders, he cannot do so without express permission from Rab-
ul-Maal. He is also not authorized to:
3. a) keep another Mudarib or a partner
4. b) mix his own investment in that particular Modarabah
without the consent of Rab-ul Maal.
Roles of the Mudarib:
Ameen (Trustee): To look after the investment responsibly,
except in case of natural calamities
Wakeel (Agent) : To purchase from the funds provided by
Rab-ul-Maal
Shareek (Partner): Sharing in any profit
Zamin (Liable): To provide for the loss suffered by the
Mudarabah due to any act on his part.
Ajeer (Employee): When the Mudarabah gets Fasid due to
any reason, the Mudarib is entitled to only the salary, Ujrat-e-
Misl.
In case there is a loss, the Mudarib will not even get the
Ujrate-Misl.
Termination of Mudarabah
The Mudarabah will stand terminated when the period
specified in the contract expires. It can also be terminated any
time by either of the two parties by giving notice. In case Rab-
ul-Maal has terminated services of Mudarib, he will continue
to act as Mudarib until he is informed of the same and all his
acts will form part 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. However, if the assets of Mudarabah are
not in cash form, it will be sold and liquidated so that the
actual profit may be determined. All loans and payables of
Mudarabah will be recovered. The provisional profit earned
by Mudarib and Rab-ul-Maal will also be taken into account
and when total capital is drawn, the principal amount invested
by Rab-ul-Maal will be given to him, balance will be called
profit which will be distributed between Mudarib and Rab-ul-
Maal at the agreed ratio. If no balance is left, Mudarib will not
get anything. If the principal amount is not recovered fully,
then the profit shared by Mudarib and Rab-ulMaal during the
term of Mudarabah will be withdrawn to pay the principal
amount to Rab-ul-Maal. The balance will be profit, which will
be distributed between Mudarib and Rab-ulMaal. In this case
too if no balance is left, Mudarib will not get anything.
Question # 4
Defination of mudarabah
"Mudarabah" is a special kind of partnership where one
partner gives money to another for investing it in a
commercial enterprise. The investment comes from the first
partner who is called "rabb-ul-mal", while the management
and work is an exclusive responsibility of the other, who is
called "mudarib.
There are 2 types of Mudarabah namely:
1. Al Mudarabah Al Muqayyadah: Rab-ul-Maal may specify a
particular business or a particular place for the mudarib, in
which case he shall invest the money in that particular
business or place. This is called Al Mudarabah Al
Muqayyadah (restricted Mudarabah).
2. Al Mudarabah Al Mutlaqah: However if Rab-ul-maal gives
full freedom to Mudarib to undertake whatever business he
deems fit, this is called Al Mudarabah Al Mutlaqah
(unrestricted Mudarabah). However Mudarib cannot, without
the consent of Rab-ul-Maal, lend money to anyone. Mudarib
is authorized to do anything, which is normally done in the
course of business. However if they want to have an
extraordinary work, which is beyond the normal routine of the
traders, he cannot do so without express permission from Rab-
ul-Maal. He is also not authorized to:
3. a) keep another Mudarib or a partner
4. b) mix his own investment in that particular Modarabah
without the consent of Rab-ul Maal.
Roles of the Mudarib:
Ameen (Trustee): To look after the investment responsibly,
except in case of natural calamities
Wakeel (Agent) : To purchase from the funds provided by
Rab-ul-Maal
Shareek (Partner): Sharing in any profit
Zamin (Liable): To provide for the loss suffered by the
Mudarabah due to any act on his part.
Ajeer (Employee): When the Mudarabah gets Fasid due to
any reason, the Mudarib is entitled to only the salary, Ujrat-e-
Misl.
In case there is a loss, the Mudarib will not even get the
Ujrate-Misl.
Termination of Mudarabah
The Mudarabah will stand terminated when the period
specified in the contract expires. It can also be terminated any
time by either of the two parties by giving notice. In case Rab-
ul-Maal has terminated services of Mudarib, he will continue
to act as Mudarib until he is informed of the same and all his
acts will form part 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. However, if the assets of Mudarabah are
not in cash form, it will be sold and liquidated so that the
actual profit may be determined. All loans and payables of
Mudarabah will be recovered. The provisional profit earned
by Mudarib and Rab-ul-Maal will also be taken into account
and when total capital is drawn, the principal amount invested
by Rab-ul-Maal will be given to him, balance will be called
profit which will be distributed between Mudarib and Rab-ul-
Maal at the agreed ratio. If no balance is left, Mudarib will not
get anything. If the principal amount is not recovered fully,
then the profit shared by Mudarib and Rab-ulMaal during the
term of Mudarabah will be withdrawn to pay the principal
amount to Rab-ul-Maal. The balance will be profit, which will
be distributed between Mudarib and Rab-ulMaal. In this case
too if no balance is left, Mudarib will not get anything.
Question # 5
Murabaha is an Islamic financing structure in which an
intermediary buys a property with free and clear title.
Murabaha is not an interest-bearing loan, which is considered
riba (or excess), and is an acceptable form of credit sale under
Sharia (Islamic religious law). Similar in structure to a rent-to-
own arrangement, the intermediary retains ownership of the
property until the loan is paid in full.
Basic rules for murabaha:
1: The subject of sale must exist at the time of the sale. Thus
anything that may notexist at the time of sale cannot be sold
and its non-existence makes the contractvoid.
Example:
“A” sells the unborn calf of his cow to ‘B’. The sale is
void.The subject matter should be in the ownership of the
seller at the time of sale. If he sellssomething that he has not
acquired by himself then the sale becomes void.

2:Thus, what is not owned by the seller cannot be sold. If he

sells something beforeacquiring its ownership, the sale is
void.
Example :
‘A’ sells to ‘B’ a machine which is presently owned by ‘C’,
but ‘A’ is hopefulthat he will buy it from ‘C’ and shall deliver
it to ‘B’ subsequently. The sale is void, because the machine
was not owned by ‘A’ at the time of sale.
3. The subject of sale must be in physical or constructive
possession of the seller when hesells it to another
person.“Constructive possession” means a situation where the
possessor has not taken physicaldelivery of the commodity yet
it has come into his control and all rights and liabilities of the
commodity are passed on to him including the risk of its
destruction (like B/Lading).
Example:
(i) ‘A’ has purchased a machine from ‘B’. ‘B’ has not yet
delivered it to ‘A’ or to hisagent. ‘A’ cannot sell the machine
to ‘C’. If he sells it before taking its delivery from‘B’, the sale
is void.(ii) ‘A’ has purchased a machine from ‘B’. ‘B’, after
identifying the machine has placedit in a garage to which ‘A’
has free access and ‘B’ has allowed him to take the
deliveryfrom that place whenever he wishes. Thus the risk of
the Machine has passed on to ‘A’.The machine is in the
“constructive possession” of ‘A’. If ‘A’ sells the machine to
‘C’without acquiring physical possession, the sale is
valid.
Explanation 1
: The gist of the rules/pre-conditions mentioned in point No. 1
TO 3Is that a person cannot sell a commodity unless:(a)It has
come into existence.(b)It is owned by the seller.(c)It is in the
physical or constructive possession of the seller.The rules/pre-
conditions mentioned in point No. 1 TO 3 are relaxed with
respect to twotypes of sale, namely:(a)Salam (Defferred
delivery Sale facility)(b)Istisna ( Manufact
Question # 5
Murabaha is an Islamic financing structure in which an
intermediary buys a property with free and clear title.
Murabaha is not an interest-bearing loan, which is considered
riba (or excess), and is an acceptable form of credit sale under
Sharia (Islamic religious law). Similar in structure to a rent-to-
own arrangement, the intermediary retains ownership of the
property until the loan is paid in full.
Basic rules for murabaha:
1: The subject of sale must exist at the time of the sale. Thus
anything that may notexist at the time of sale cannot be sold
and its non-existence makes the contractvoid.
Example:
“A” sells the unborn calf of his cow to ‘B’. The sale is
void.The subject matter should be in the ownership of the
seller at the time of sale. If he sellssomething that he has not
acquired by himself then the sale becomes void.

2:Thus, what is not owned by the seller cannot be sold. If he

sells something beforeacquiring its ownership, the sale is
void.
Example :
‘A’ sells to ‘B’ a machine which is presently owned by ‘C’,
but ‘A’ is hopefulthat he will buy it from ‘C’ and shall deliver
it to ‘B’ subsequently. The sale is void, because the machine
was not owned by ‘A’ at the time of sale.
3. The subject of sale must be in physical or constructive
possession of the seller when hesells it to another
person.“Constructive possession” means a situation where the
possessor has not taken physicaldelivery of the commodity yet
it has come into his control and all rights and liabilities of the
commodity are passed on to him including the risk of its
destruction (like B/Lading).
Example:
(i) ‘A’ has purchased a machine from ‘B’. ‘B’ has not yet
delivered it to ‘A’ or to hisagent. ‘A’ cannot sell the machine
to ‘C’. If he sells it before taking its delivery from‘B’, the sale
is void.(ii) ‘A’ has purchased a machine from ‘B’. ‘B’, after
identifying the machine has placedit in a garage to which ‘A’
has free access and ‘B’ has allowed him to take the
deliveryfrom that place whenever he wishes. Thus the risk of
the Machine has passed on to ‘A’.The machine is in the
“constructive possession” of ‘A’. If ‘A’ sells the machine to
‘C’without acquiring physical possession, the sale is
valid.
Explanation 1
: The gist of the rules/pre-conditions mentioned in point No. 1
TO 3Is that a person cannot sell a commodity unless:(a)It has
come into existence.(b)It is owned by the seller.(c)It is in the
physical or constructive possession of the seller.The rules/pre-
conditions mentioned in point No. 1 TO 3 are relaxed with
respect to twotypes of sale, namely:(a)Salam (Defferred
delivery Sale facility)(b)Istisna ( Manufact