A type of partnership (sharaka or musharaka) for profit (ribh) which is structured so that one partner (known as rabb al-mal) provides capital (funds or mal) and the other (known as al-mudarib) provides labor and expertise (‘aamal and khibra). The partners will share the profit (positive results) according to the terms and conditions agreed to at the time of contracting (majlis al-aqd)- typically at a mutually agreed ratio.

The word “mudaraba” (مضاربة) is derived from the Arabic construction “al-darb fi al-ard” (الضرب في الأرض) which means, among others, to move from place to another searching for sustenance or livelihood (literally, it means to travel across earth). The term “mudaraba” is used by the Hanafis and Hanbalis, whilst the Malikis and Shafi’is alternatively use the term qirad (قراض).

Scholars consider mudaraba a valid and legal contract, as evidenced in the Quran, sunna, and ijma’.

Mudaraba is typically classified as restricted mudaraba (مضاربة مقيدة) and unrestricted mudaraba (مضاربة مطلقة).