Professional Documents
Culture Documents
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 (Investor)
Types of Mudarabah
1. Al
Mudarabah
Mudarabah)
Al
Muqayyadah(Restricted
Rabb-ul-Maal
Capacities of Mudarib
1.
2.
3.
4.
5.
Capital of Mudarabah
EXAMPLE
If the capital is Rs.100,000/-, they cannot agree on a
condition that Rs.10,000 out of the profit shall be the share
of the Mudarib nor can they say that 20% of the capital shall
be given to Rab-ul-Maal. However they can agree that 40%
of the actual profit shall go to the Mudarib and 60% to the
Rab-ul-Maal or vice versa.
Termination of Mudarabah
With notice.
Collective Mudarabah
Collective Mudarabah means a joint pool created by many
investors and handed over to a single Mudarib who is normally
a juristic person.
Collective Mudarabah creates two different relationships:
Relationship between investors inter se, which is Shirkah
or Partnership.
Relationship of all the investors with mudarib, which is
Mudarabah.
Mudarabah
Diff b/w Musharakah & Mudarabah
Musharakah
In Musharaka both of the partners invest
Both parties can work
Mudarabah
In Mudarabah one party invest (Rabbul- Mal) and other
party work (Mudarib)
Profit is shared as per agreed ratio
In case of Mudarbah all losses are borne by Rabbul- Mal
APPLICATION
Mudarabah in Banking
Deposits (Liability)- 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
Mudarabah in Banking
Investments - The Bank as the Rabb-ul-maal
Profit from the Mudaraba activity is shared between the
Bank (as Rabb-ul-maal) and the Mudarib in a pre-agreed
ratio
The Bank will bear all the loss unless the Mudarib
violates the agreement
Example
How portfolio
Deposit Base:
Retail Mudarabah
Treasury Mudarabah
OPERATIONAL
CREDIT risk
shared
Displaced
Commercial
Risk
MARKET
SHARIAH COMPLIANCE
RISK
SOLVENCY
&
LIQUIDITY
REPUTATION RISK
RATE OF
RETURN
EQUITY
INVESTMENT
RISK
Credit Risk
Pledge of Assets as Collateral
Third Party Guarantee
Takaful
Market Risk
Parallel Contract (if permissible)
Binding Promise
Equity Risk
Seek diversification of capital contribution
Using restricted Mudarabah
Using Musharakah than Mudarabah where possible
Liquidity Risk
Diversify Sources of Funds
Maturity matching of assets and liabilities
Rely on Marketable Assets
End Of Lecture