Table of Contents
What does mudaraba mean?
The term ‘Mudaraba’ has been derived from one of the meanings of the Arabic word ‘ﺏﺮﺿ’ which means ‘Travel’. Thus the word ‘Mudaraba’ means ‘Travel’ for undertaking business. Mudaraba is a partnership in profit whereby one party provides capital and the other party provides skill and labour.
What is murabaha and mudaraba?
equity-based profit and loss sharing methods within Islam known as mudaraba (trust financing), musharaka (participating finance), murabaha (cost plus trade financing) and sukuk (Islamic. bonds).
What is musharaka and mudaraba?
Mudarabah (مضاربة) refers to “trustee finance” or passive partnership contract, while Musharakah (مشاركة or مشركة) refers to equity participation contract. Other sources include sukuk (also called “Islamic bonds”) and direct equity investment (such as purchase of common shares of stock) as types of PLS.
What is mudarabah in Islam?
Also known as mudarabah, modarabah, and modaraba. An Islamic finance technique in which a lender or investor (rab al maal) and a borrower or investment manager (mudareb) establish a profit-sharing partnership to undertake a business or investment activity.
What is Mudaraba contract?
Mudaraba is a partnership profit between the Bank and an enterprise / company for a pre-agreed period. Customers can deposit funds with the Bank, which will then be invested in the functioning of economic activity/business that comply with principles of Sharia.
Is Mudarabah prohibited in Islam?
On this basis Mudarabah is completely against the teaching of Quran. The reason is that in such type of partnership the financer (Rab-ul-mal) takes the rewards of his capital which is strictly prohibited by Quran in Chapter 2 verses 275-179. Hence, this method is against the basic teaching of Quran.
What is the type of Mudarabah?
There are two types of Mudarabah: restrictive and unrestrictive. Restrictive Mudarabah means that the investor has specified investment details in the Mudarabah contract and has restricted the working partner within the scope of such specifications.
How Mudarabah is used in project financing?
Mudarabah contracts mostly deal with projects that have not yet started. The fund manager may be owning a piece of land and then seeks help from the IFI to build the house. An investment can either generate profit and losses and thus the parties must agree on how to share this.
What is Bai Al Salam?
In a bai al salam transaction, a lender (Al-muslam) buys an asset from a party seeking financing (the seller or Al-muslam Ileihi), pays the purchase price of the asset in advance and agrees to take delivery of the asset at a later date.
What is Tijarah?
Tijarah is a working capital solution especially for those customers who sell their inventory on credit and require funds for operations during the credit period. In Tijarah, the Bank purchases the finished goods from the customer and after taking the delivery, sells the goods in the market.
What is Bai istisna?
Bai-Istisna may be defined as advance purchase of a commodity/product making advance payment by the Bank on execution of a written contract wherein it is clearly mentioned that the commodity will be delivered as per specification, size, quality, quantity at a fixed future time in a particular place.
What is Tijarah in Islam?
In Tijarah, the Bank purchases the finished goods from the customer and after taking the delivery, sells the goods in the market.
What is a running Musharaka?
Musharakah, an Arabic word which means ‘sharing’, is an ideal alternative for the interest based financing with far reaching effects on both production and distribution. Running Musharakah is based on the Islamic principle of Sharikat ul Amwal, in which all the partners invest some capital into the business.
What is istina?
A traditional istina’a (‘istina’a’) is an agreement between two parties (the Islamic funder and the construction contractor) whereby the Construction contractor agrees at the outset to construct/manufacture a clearly described/specified PPP project asset for the Islamic funder.
What is forward Ijara?
Forward Ijara is to lease, a fully specified and described asset, which the lessor undertakes to produce and. deliver to the lessee on future date. Following are the essential points to ensure that financing/transaction.
What is the meaning of the word mudarabah?
In the Qur’an, the root for the word mudarabah, d-r-b, is used in a verse that clearly indicates the lawfulness of trade: And others who go forth in the earth, seeking the bounty of the Almighty (73:20).
What is a mudaraba agreement?
That is why sometime Mudaraba is referred as sleeping partnership. An important characteristic of Mudaraba is the arrangement of profit sharing. The profits in a Mudaraba agreement may be shared in any proportion agreed between the parties before hand. However, the loss is to be completely borne by the owner of the capital.
What is joint mudaraba?
The joint Mudaraba may be between the investors and the bank on a continuing basis. The investors keep their funds in a special fund and share the profits without even the liquidation of those financing operations that have not reached the stage of final settlement. Many Islamic Investment Funds operate on the basis of joint Mudaraba.
What are the characteristics of mudaraba?
An important characteristic of Mudaraba is the arrangement of profit sharing. The profits in a Mudaraba agreement may be shared in any proportion agreed between the parties before hand. However, the loss is to be completely borne by the owner of the capital.