What Is Modaraba Mode Of Financing Details Formation Of Permission And Restriction?

Hi there,

Modaraba also known as Mudaraba is an Islamic finance term and is one of the most popular Islamic banking contracts around the world.

Modaraba is essentially a trust finance contract which is based on a partnership where there is an investor and a working partner who manages the investment.

In this contract there is a clauses of what is permissible and restricted as follows:

• A modaraba contract is always based on equal risk sharing
• Profit and losses must be shared equally in a modaraba contract investment
• The investment should be Shariah compliant which means that it should comply to the Islamic financial rulings.
• The investment under the Modoraba contract cannot be for any unlawful purpose such as gambling.
• Interest is prohibited in the Modoraba contract and in all forms of Islamic financial transactions therefore there should be no debt in this mode of financing.

I hope this helps to answer your question :)