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Islamic Finance




Uqud al-Ishtirak


Arabic (عقود الإشتراك) for contracts (uqud– plural of aqd) that entail sharing in ventures/ businesses and profits (ribh) through specific partnership (sharakah/ sharikah). Uqud al-ishtirak include mudarabah (aqd al-mudarabah), musaqat/ musaqah (aqd al-musaqat/ aqd al-musaqah), mugharasah (aqd al-mugharasah), muzara’ah, (aqd al-muzara’ah), etc.

For example, in mudarabah two parties enter into an agreement whereby one (rab al-mal) provides an amount of money (or generally any type of capital), while the other (mudarib) contributes labor, i.e., efforts to invest the capital. The positive outcomes (profits) are shared by the two parties according to a specific ratio (pre-agreed percentage), while the negative outcomes (losses) are borne by the provider of funds (rab al-mal) unless such losses are caused by mudarib due to negligence (ihmal) or misconduct/ mismanagement (taqseer).



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