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Islamic Finance


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Mubaraah


Arabic (المبارأة, مبارأة) for mutual relief from obligations or commitments. It involves, in case of exit, one party or more relieving another party or more from obligations/ commitments against counter relief. In practice, it is used in mudarabah-based investment accounts (and respective pools) where existing account holders (depositors) relieve each other from commitment towards their rights in any undistributed profits or not attained profits as well as their rights in the remaining balance of investment risk reserves (IRR) and profit equalization reserves (PER) for debts.

An exiting party will also be relieved from commitment towards any losses that have not yet materialized.


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