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‘Mudarabah’, the Profit-sharing System in Islam

In: The Foundations of Islamic Political Economy

Author

Listed:
  • Masudul Alam Choudhury

    (University College of Cape Breton)

  • Uzir Abdul Malik

    (Universiti Kebangsaan Malaysia)

Abstract

The term ‘mudarabah’ stands for the form of profit-sharing enterprise in the Islamic economic system. It has two principal characteristics. First, the enterprise works on the basis of share capital among a large number of shareholders from various sectors of the economy. Secondly, the profit-sharing enterprise is based on economic cooperation wherein participants undertake joint ventures and cofinance economic projects. The essence of economic cooperation is shown in the sharing of total investments through capital and other visible or invisible assets like allocation of time. All such endowments, no matter how large or how small, on the part of individual shareholders entitle them to equal voting and decision making rights in the enterprise. However, the total profits are shared in proportion to their individual shares in investment.

Suggested Citation

  • Masudul Alam Choudhury & Uzir Abdul Malik, 1992. "‘Mudarabah’, the Profit-sharing System in Islam," Palgrave Macmillan Books, in: The Foundations of Islamic Political Economy, chapter 5, pages 147-200, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-349-21973-5_5
    DOI: 10.1007/978-1-349-21973-5_5
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