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Zia Ullah Khan


Musharakah is an Arabic word which literally means sharing. In business and

trade aspect, it is a joint partnership in which all the partners share the profit
and loss of the joint business. In the modern capitalism economy, interest is
the sole tool used by financing of every type. Islam has already prohibited
interest or demand extra money on the income. There we can avoid the
interest games by implementing Musharkah in our economy. This is
accordingly to the principal of Islam. In Interest only the debtor is to bear all
the losses and has to pay the fixed amount of interest to the financer while in
Musharkah, loss is also to be bearable by the financer but profit can be
determined according to the agreement . For example, in the modern
economy, banks provide finance and demand interest on the loan after a
certain period of time and bank is not able to bear the loss if business goes
to shut down but in Islamic world where Islam give the equal sharing of loss
for both the parties but profit can be adjustable. According to the Islamic
principles, a financer must determine that either is they providing load on
humanitarian grounds or either to desire share the profit. If he is providing
the debt, should must resist from claiming any excess on the principal of the
loan because his purpose was only to assist him. There are some basic
principals in Musharkah which need to be discussed here.

All investors/partners invest in the business.

All investors can work in management and provide guidance.
All investors share the loss according to their investment.
All investors provide financing in business activity according to their
Any kind of property asset that can be accessed and keep certain
commercial value could be considered as an acceptable source of
capital. For example, intellectual property asset.
All investors put their skills, expertise and knowledge equally in
Profit must be distributed according to their work.

M. Zia Ullah Khan


Mudharabah is a vast term of partnership where one partner provides

finance to the person for investment purpose in commercial enterprise. The
investment comes from the first partner who is actually called Rabb-ul-
maal while another person who is investing in commercial enterprise is
actually called Mudharabah

In Mudarbah, Rabb-ul-maal can specify the mudarib to invest in particular

business and the mudarib is able to follow the instruction of Rabb-ul-maal
while in Musharkah this rule is not applicable. This is also called al-
mudharabah al-muqayyadah which can we say (restricted mudharabah) but
if Rabb-ul-maal gives free hand to mudarib, so the mudarib is free to invest
in any business which is called al-mudharabah al-mutlaqah ( unrestricted
mudharabah ). A Rabbul-mal can contract with the mudharabah for more than one
person through a single transaction is taken place which means that they can offer their
money to both A and B parties, so that each one of them act for them as a mudarib and
the capital of the mudharabah can be utilized by both of them jointly and the shares of
the mudarib will be distributed between them according to the agreed proportion. There
are some fundamental rules which are to be followed in Mudarbah.

Only one party invest which is called Rabb-ul-maal

Rab-ul-maal has no any right to influence in management which is to
be carried out by the mudarib.
Only Rab-ul-maal is able to bear all the loss because he is the only sole
investor in the business.
Capital in mudharabah must be in shape of money.

M. Zia Ullah Khan

Only the Mudarib is able to do business but in some cases with the
consent of Rabb-ul-maal and second option without the consent of
Rabb-ul-maal, the second option is base on trust and humanitarian
Profit will be equally distributed between the Rabb-ul-maal and

Role of Mudharib:

The Mudharib should be

Ameen ( trustee )
Wakeel ( Agent )
Sharik ( Partner )
Dhamim ( Liable )
Ajeer ( Employee )