Diminishing Musharakah (Partnership) (2/2)
Question
The agreement between you and the businessman is an agreement of Mudaarabah. Mudaarabah is a partnership wherein one partner called the Rabbul Maal invests his capital and the work is done by the other partner known as the mudhaarib. All capital comes from the Rabbul Maal and all management and work is done by the Mudhaarib. If the Rabbul Maal specifies a certain type of business that he wants his money invested in, then the Mudhaarib does not have the authority to invest the money in any other kind of business. This is called Mudhaarabah Muqayyadah or restricted Mudhaarabah. If the Rabbul Maal does not specify a certain type of business, then the Mudhaarib may invest the capital in any business he deems fit. This is called Mudhaarabah Mutlaqah or unrestricted Mudhaarabah.
Answer
A necessary condition of the abovementioned partnership is that both parties agree at the beginning on the share of the actual profit to which each partner is entitled. The profit cannot be based on the capital. If there is a profit after expenses, the Rabbul Maal and Mudaarib will share the profit according to what was initially agreed. If there is a loss, the Rabbul Maal (financier) will bear the loss. The Mudaaribs loss will be the loss of the work and labor. All expenses of the Mudaarabah business will be for the Rabbul Maal’s account.
And Allah Ta’āla Knows Best
- Checked & approved by
- Mufti Ebrahim Desai
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