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Mudarabah Partnerships

Mudarabah partnerships, also known as sleeping partnership or profit-sharing partnerships, are a type of financial arrangement where two parties come together to invest in a business venture. In this setup, one party provides the capital (known as the "rabb al-mal") while the other party contributes their expertise and time (known as the "mudarib"). The mudarabah partnership is based on a shared profit-sharing agreement, where both parties divide the profits according to an agreed-upon ratio.

What are the Key Features of Mudarabah Partnerships?​

  • Shared Capital: One party provides the capital required for the business venture, while the other party contributes their expertise and time.
  • Profit-Sharing Agreement: The partners agree on a shared profit-sharing arrangement, which determines how profits will be divided between them.
  • Risk-Sharing Arrangement: Both parties share the risks associated with the business venture.
  • Limited Liability: The liability of each partner is limited to their investment in the business.
  • Flexibility: Mudarabah partnerships can be structured in various ways, allowing partners to negotiate terms that suit their needs and expectations.