Mudharabah (مضاربة) is a type of partnership (sharakah or musharakah) for profit (ribh) which is structured so that one partner (known as rabb al-mal) provides capital (funds or mal) and the other (known as al-mudharib) provides labor and expertise (‘amal and khibrah). The partners will share the profit (positive results) according to the terms and conditions agreed to at the time of contracting (majlis al-aqd)- typically at a mutually agreed ratio.
The word “mudharabah” is derived from the Arabic construction “al-dharb fi al-ardh” (الضرب في الأرض) which means, among others, to move from one place to another searching for sustenance or livelihood (literally, it means to travel across earth). The term “mudharabah” is used by the Hanafis and Hanbalis, whilst the Malikis and Shafi’is alternatively use the term qiradh (قراض).
Scholars consider mudharabah a valid and permissible contract, as evidenced in the Quran, sunna, and ijma’.
Mudharabah is typically classified as restricted mudharabah (مضاربة مقيدة) and unrestricted mudharabah (مضاربة مطلقة).
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