Is Mudaraba’a Lawful?

Farooq Aziz

Abstract


Mudaraba'a is a special type of partnership in Islamic Shari'a, between
at least two partners for any trading purpose. Out of them one is financer,
and the other in worker. The role of financer is as a sleeping partner,
and worker run's the business by using his labour and expertise. By
keeping the same division number of partners may be increased. Profit
is divided among the partners in a pre-decided ratio, but the entire loss
should be faced by financer only.
This type of Partnership is common in business and have significant
importance in so-called Islamic banking or interest free banking.
Whereas the question of its legality is concerned, there is a consensus
about it, and different arguments are given from Qur'an and Hadith for
its validity. But unfortunately non-of them have any logical or intellectual
base. Any solid proof from Qur'an & Hadith is not available in this
regard. The events which are presented in this context from the life of
holy prophet Muhammad & Sahaba-e-karam do not have any
concern with fikhi term mudaraba'a. The same situation is with other
reasons which are given in this regard. On the other hand this act has
a deep resemblance with riba (interest). Since no evidence can be
provided to prove its validity, hence mudaraba'a is completely unlawful
from Islamic point of view.


References


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CHAPRA, MUHAMMAD UMAR (2005) Towards New Monetary Policy, Urdu Trans. Faroqui, Aijaz Ahmed, Aik Munsifana Zari Nizam, Karachi, pp 242-243.

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