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.
How Mudaraba applies to your trading account
Mudaraba is the structural blueprint behind most halal investment accounts: you provide capital, the manager provides expertise, and profits are shared at a pre-agreed ratio. Losses of capital fall on you unless the manager is negligent.
A Shariah-aligned broker adapts this principle to retail trading by holding client funds in segregated accounts, charging transparent fees for their platform and execution service, and never taking a hidden interest cut on your positions. That is the halal alternative to a conventional brokerage account.