Distribution of Profit and Loss

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If the business has incurred loss in some transactions & 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.

Apart from the agreed proportion of the profit, as determined in the above manner, the Mudaarib cannot claim any periodical wage or a fee or remuneration for the work done by him for the Mudaraba. All schools of Islamic Fiqh are unanimous on this point. However, Imam Ahmad has allowed for the Mudaarib to draw his every day expenses of food only from the Mudaraba Account. The Hanafi jurists restrict this right of the Mudaarib only to a situation when they is on a business trip outside his own city. In this case they can claim his personal expenses, accommodation, food, etc. but they is not entitled to get anything as every day allowances when they is in his own city.

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The Mudaraba becomes void (Fasid) if the profit is fixed in any way. In this case, the whole amount (Profit + Capital) will be the Rab'ul-Maal's. The Mudaarib will be an worker earning Ujrat-e-Misl. The remaining amount will be called (Profit). This profit will be shared in the agreed (pre-agreed) ratio.

Makes use of Of Musharaka/Mudaraba:

Asset Side Financing

These modes can be used in the following areas (or can replace them according to Shariah rules).

- Any term financing 
- Project financing 
- Small & medium enterprises setup financing 
- Giant enterprise financing 
- Import financing 
- Import bills drawn under import L/C 
- Inland bills drawn under inland L/C 
- Bridge financing 
- LC without margin (for Mudarba) 
- LC with margin (for Musharaka) 
- Export financing (Pre-shipment financing) 
- Working capital financing 
- Walking accounts financing/short term advances

Liability Side Financing

A 100% Online interactive lecture on Mudarabah Financing & lots of other Islamic Financial Instruments could be seen under FREE Islamic Finance Lectures at AIMS - Islamic Finance Institutes' net site.

- For current/saving/monthly-profit/investment accounts (deposit giving Profit based on Musharkah / Mudaraba - with predetermined ratio) 

- Inter-Bank lending/borrowing 
- Term Finance Certificates & Certificate of Investment 
- T-Bill & Federal Investment Bonds/Debenture 
- Securitization for giant projects (based on Musharkah) 
- Certificate of Investment based on Murabahah 
- Islamic Musharaka bonds (based on projects requiring giant amounts - profit based on the return from the project)


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