An Arabic term that denotes unrestricted mudaraba; a mudaraba contract which is related to investment accounts in which the account holder authorizes the mudarib (usually a bank) to invest his funds without any restrictions as to what or how the bank may invest these funds. The only restriction, however, is that the bank should adhere to shari’a rules and principles pertaining to investment. The bank is at liberty to pool the funds from different account holders with its shareholders’ funds and other deposits in order to use the pooled amounts in providing financing facilities or undertaking investment projects.
The return on mudaraba funds will be shared by the bank and its account holders based on specific criteria such as investment horizons, right of withdrawal, etc. Usually, investment returns are calculated on a month-to-month accrual basis. Investment horizons typically range from one to sixty months. Within the mudaraba period, the investment account holder cannot withdraw his funds without a prior notice the length of which is usually determined upon contracting.
