It is necessary for the validity of Mudarabah that the
parties agree, right at the beginning, on a definite proportion of the actual
profit to which each one of them is entitled. The Shariah has prescribed no
particular proportion; rather it has been left to their mutual consent. They
can share the profit in equal proportions and they can also allocate different
proportions for Rab-ul-Maal and Mudarib. However in extreme case where the
parties have not predetermined the ratio of profit, the profit will be
calculated at 50:50.
The Mudarib & Rab-ul-Maal cannot allocate a lump sum
amount of profit for any party nor can they determine the share of any party at
a specific rate tied up with the capital. For example, if the capital is
Rs.100,000/-, they cannot agree on a condition that Rs.10,000 out of the profit
shall be the share of the Mudarib nor can they say that 20% of the capital
shall be given to Rab-ul-Maal. However they can agree that 40% of the actual
profit shall go to the Mudarib and 60% to the Rab-ul-Maal or vice versa.
It is also allowed that different proportions are agreed
in different situations. For example, the Rab-ul-Maal can say to Mudarib “If
you trade in wheat, you will get 50% of the profit and if you trade in flour,
you will have 33% of the profit”. Similarly, he can say “If you do the business
in your town, you will be entitled to 30% of the profit and if you do it in
another town, your share will be 50% of the profit”. Apart from the agreed
proportion of the profit, as determined in the above manner, the Mudarib cannot
claim any periodical salary or a fee or remuneration for the work done by him
for the Mudarabah.
All schools of Islamic Fiqh are unanimous on this point.
However, Imam Ahmad has allowed for the Mudarib to draw his daily expenses of
food only from the Mudarabah Account. The Hanafi jurists restrict this right of
the Mudarib only to a situation when he is on a business trip outside his own
city. In this case he can claim his personal expenses, accommodation, food,
etc. but he is not entitled to get anything as daily allowances when he is in
his own city.
(Image Courtesy :
AIMS Institute of Islamic banking and finance image taken from the Islamic
banking courses and diploma in Islamic finance books)
If the business has incurred loss in some transactions
and has gained profit in some others, the profit shall be used to offset the
loss at the first instance, then the remainder, if any, shall be distributed
between the parties according to the agreed ratio.
The Mudarabah becomes void (Fasid) if the profit is fixed
in any way. In this case, the entire amount (Profit + Capital) will be the Rab-ul-Maal’s.
The Mudarib will just be an employee earning Ujrat-e-Misl.
The remaining amount will be called (Profit).
This profit will be shared in the agreed (pre-agreed)
ratio.
I learn this
important topic during my Islamic
finance qualification at Luxemburg institute of Islamic
banking and finance when I was preparing for my Islamic finance certificate
I use to take different Islamic finance training to complete my Islamic finance
certification and start my diploma
in Islamic banking. Now I am teaching in institute of Islamic finance for Islamic
finance course and exams are near so I thought to share this lecture on
internet for my students.
