The provider of funds in a contract of mudaraba. The capital provider (in Arabic rab al-mal) hands over mudaraba capital (ras al-mal) to the mudarib in order for the latter to invest it in mudaraba activities. The provider of funds should not interfere in the mudarib’s responsibilities as to the running of mudaraba venture. In other words, the provider of funds should not restrict the mudarib’s actions in such a way to hinder the attainment of mudaraba objectives (i.e., profit making). All actions related to decision taking in mudaraba, such as selling, buying, investing, etc, are not the responsibility of rab al-mal, but rather that of the mudarib. The majority of fuqaha are of the opinion that such actions don’t fall in the scope of rab al-mal’s duties, and as such, they cannot be stipulated in the contract. Notwithstanding, all work that is carried out by rab al-mal without stipulation, and under the mandate of the mudarib is permissible.
Islamic Finance
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