Glossary
Mudaraba
مضاربةDefinition
A profit-sharing partnership where one party provides capital and the other provides labour and expertise.
Profits are shared at a pre-agreed ratio. Losses are borne by the capital provider, except in cases of negligence by the manager. Mudaraba is one of the two core risk-sharing contracts in Islamic finance.
Modern Islamic banks use mudaraba for investment accounts (the bank manages depositors' money) and for capital-raising by enterprises.