Share Mode-Mudaraba

Share Mode-Mudaraba

MUDARABA (Trustee Profit Sharing / Partnership) :

Means an agreement between two parties under which one party provides capital and the other party contributes his skills, efforts and work for a percentage of profits. The owner of the capital is known as “Shaheb- Al- Maal “and the user is known as” Mudarib”. In the event of loss, the owner of capital (Shaheb- Al- Maal) shall bear entire loss unless such a loss arises as a result of infringement, negligence or breach of occasion by the other party (Mudarib).

 

AAOIFI says- Mudaraba is a partnership in profit, whereby one party provides capital (rab al mal) and the other party provides labour (Mudarib).”

 IDB says-   Mudaraba is a form of partnership where one party (sahib al mal/ rabbul mal) provides the fund while the other provides the expertise and management. The later is referred to as the Mudarib (Manager). Any profit accrued is shared between the two parties on a pre agreed basis, while capital loss is exclusively borne by the partner providing the capital (Sahib al mal)

 

Bank Company Act -1995 (Correction)- Mudaraba means such in term of which a bank conducted in accordance with the Islami Shariah provides capital for anything and the customer employees his efficiency, effort, labour and intelligence”.

Types of  Mudaraba :

Mudaraba contracts may be divided into Two types:

i)  Restricted Mudaraba  – Having more than one specific purpose of objectives.

ii)      Unrestricted Mudaraba  - Having   one specific purpose of objectives.

CONDITIONS FOR VALID MUDARABA CONTRACT

1.      Capital should be known at the time of contract.

2.      Capital should consist of cash in the form of currency/paper money. Commodities are not allowed as capital. Now a days, gold and silver have also become commodities. 
3.      Capital should be in possession of Saheb-ul-Mal to give it to Mudarib. Debt cannot constitute a capital for Mudaraba business. 
4.      Mudarib will handle the capital alone. Participation of the Saheb-ul-Mal in the work of mudarib will void the contract. 
5. Share of profit should be determined as half, one third, or 30%, 40% etc. not as Tk. 30/- or Tk. 40/- so on.

6. Profit will be divided and loss will be bore by the bank

Rights of Saheb-ul-Mal:

a. Profit will be divided in presence of the Saheb-ul-mal.

a. The Mudarib cannot take his share in the absence of Saheb-ul-mal.

Rights of Mudarib:

1.      Mudarib has the right to receive share of the profit for his efforts.

2.               Inspite of his sincere efforts if the business incurred any loss, no recovery could be made for such loss.

3.      He has the right to run the business freely without interference of the Saheb-ul-mal.

4.      If the contract is nullified he has the right to receive remuneration for his labour in capacity of a servant in Business.

5.      Right to re-imbrues the expenses in connection with essential business tour (conveyance, boarding lodging etc.)

Advantages of Mudaraba System:

Co-operations between have and have not.

Utilizations of idle funds.

Development of Entrepreneurship and self-employment.

Transaction Process:

A generic mudaraba process could take the following basic form:

Step 1: The investor and the mudarib agree on the nature of the venture and    the terms of profit sharing.

Step 2: The investor provides capital to the mudarib.

Step 3: The mudarib undertakes the venture agreed upon between the   parties

·                                  Step 4: Profits from the investment are shared between the investor and the mudarib.