Mudarabah (Trustee Financing)
A partnership where one party provides 100% of the capital while the other provides managerial expertise.
Detailed Definition
In a Mudarabah contract, the investor (Rab-ul-Mal) supplies the funds and the fund manager/entrepreneur (Mudarib) provides operational management. Profits are divided according to a pre-agreed percentage, but financial losses are borne solely by the capital provider unless caused by misconduct.
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Related in Islamic Finance
Nisab
The minimum threshold of qualifying wealth an individual must possess before Zakat is due.
Gharar (Excessive Uncertainty)
An element of extreme ambiguity, uncertainty, or deceit in a commercial contract prohibited in Islamic law.
Ijarah (Islamic Leasing)
A Shariah-compliant leasing agreement where the bank purchases an asset and leases its usufruct to the client.