Mudarabah

Mudarabah is considered one of the forms of Islamic financing that combines money and work with the aim of investing funds that their owners cannot invest themselves. Mudaraba is known as a contract between two or more parties, where one party provides money while the other participates with his effort, with an agreement to distribute profits at a known percentage. In banking mudarabah, the partnership is between the customer (Mudarib/ Speculator) and the bank, where the bank manages the funds for the purpose of making a profit, and the bank bears all losses resulting from the activities unless the Mudarib (Speculator) violates the terms of the contract.

Types of service:

• Joint mudarabah: The Islamic bank, as a mudarib, offers to invest the savings of the owners of the funds with the owners of investment projects. The profits are distributed according to the agreement concluded between the three parties, while the losses of the project are borne by the owner of the money.
• Single speculation: The Islamic bank provides financing for a specific project, and the worker undertakes the necessary work. Profits are distributed according to the agreement, but this type has become less used due to the practices of some individuals that violate Sharia law.

Types of Mudarabah (Speculation):

• Absolute speculation (unlimited authorization): The speculator is given complete freedom to dispose of the money without restrictions on place, time, or description of the work, and communication with the owner of the money is only at the end of the speculation.
• Restricted speculation (limited authorization): The owner of the money stipulates some conditions to guarantee his money, with qualitative, temporal, and spatial restrictions.