Definition for : Mudharaba

This is an agreement between a financial institution and a company, with the financial institution acting as provider of funds and the company as the manager, for investing in a pre-determined activity or class of Assets, which grants each party a Share of the Earnings which is determined at the time of the Investment. The manager does not Share in any financial losses which are borne solely by the provider of capital. The manager's losses are deemed to be the Opportunity cost of the manager's workforce which has failed to generate sufficient Revenues.
(For more, see the Newsletter, November 2006 )
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