what is risk sharing ? theory of profit in islam?


Perspective on Islamic Finance: What is Risk Sharing? by Prof Abbas Mirakhor



Theory of Profit in Islam 

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Termination of Mudarabah and Musharakah

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Distribution of the Profit in Mudarabah and Musharakah

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    Distribution of the Profit in Mudarabah It is necessary for the validity of Mudharabah that the parties agree, right at the beginning, on a definite proportion of the actual profit to which each of them is entitled. No particular proportion has been prescribed by the Shari’ah; rather, it has been left to their mutual consent. They can share profit in equal proportions for the rabb-ul-mal and the mudarib. However, they cannot allocate 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 RM10000, they cannot agree on a condition that RM10000 out of the profit shall be the share of the mudarib, nor can they say that 20% of the capital shall be given to rabb-ul-mal. However, thet can agree that 40% of the actual profit shall go to the mudarib and 60%to the rabb-ul-mal or vice versa.   It is also allowed that different proportions are agreed in different situations. Fo
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Current issues about Musharakah

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