16. Mushaarakah
• “Mushaarakah” literally means sharing
• It is derived from “shirkah” which means
“being a partner”
• Joint enterprise formed for conducting
business
• Profit & loss
17. Rules of Mushaarakah
• Assets of Mushaarakah are jointly
owned in proportion to the capital of
each partner.
• loss [by general consensus] is always
subject to the ratio of investment.
18. Cont‟d
Ratio of profit:
Must be equal to ratio of investment - Imam
Malik & Imam Shaafi„ee
Does not have to be equal – Imam Ahmad
May differ, except that a sleeping partner
cannot share the profit more than the
percentage of his capital – Imam Abu Hanifah
19. Management of Mushaarakah
• Each partner has a right to take part in
Mushaarakah management.
• The partners may appoint a managing
partner by mutual consent.
• One or more of the partners may decide not
to work for the Mushaarakah and work as a
sleeping partner.
20. Cont‟d
• If one or more partners choose to become
nonworking or sleeping partners, the ratio
of their profit cannot exceed the ratio of
their capital investment.
• Any partner can liquidate his shares and
leave the partnership according to the
contract or by mutual consent of other
Partners.
22. Cont‟d
• Mudarib who runs the business can be
a natural person, a group of persons, or
a legal entity and a corporate body.
• Rabbulmal (Investor) shall provide his
investment in money or species
23. Cont‟d
• Conduct of business shall be carried out
exclusively by the Mudarib within the
framework of mandate given in the
Mudaraba agreement
• The profit shall be divided in strict
proportion agreed at the time of contract
24. Cont‟d
• Financial losses of the Mudaraba shall be
borne solely by the Rabbulmal, unless it is
proved that the Mudarib has been guilty
• The loss, if any, shall be shared in
proportion to the capital of the parties.
25. Cont‟d
• The liability of Rabbulmal is limited to his
investment unless otherwise specified in the
Mudaraba contract
• Mudaraba may be of various types
• The Mudarib can invest his funds in the
business of the Mudaraba with the
permission of Rabbulmal
