Mudarabah (profit-sharing)

Mudarabah is a type of partnership where one person (the investor) provides capital, and another (the entrepreneur) manages a business idea. Profits are shared between them based on a pre-agreed ratio, while any losses are borne solely by the investor unless caused by the entrepreneur's misconduct. The entrepreneur invests effort and expertise, aiming to grow the business, with both parties benefiting from successful outcomes. This arrangement encourages risk-sharing and aligns interests, making it a common form of Islamic finance that promotes collaboration and ethical investment.