Muḍārabah Approval Framework
A trust-based investment contract in which one party (Rabb al-Māl) supplies capital and another (Muḍārib) supplies labour and expertise, sharing profits per a pre-agreed ratio while losses are borne by capital alone — except where caused by misconduct or negligence of the Muḍārib.
OSAS-MUD™ — Approval Memorandum Template
Section 1 — Parties
Section 2 — Capital & Profit
Section 3 — Governance
Essential vs Prohibited Elements
Essential Conditions (must hold)
- Capital must be clearly defined in amount, currency and form (cash, not debt)
- Profit-sharing ratio is agreed in percentages, not fixed amounts, at contract inception
- Losses are borne exclusively by Rabb al-Māl unless attributable to Muḍārib misconduct or negligence
- Muḍārib has discretion within the agreed (restricted or unrestricted) mandate
- No guarantee of capital or profit by the Muḍārib
- Profit realisation requires actual completion of the underlying venture (no profit on capital alone)
Prohibited Elements (must absent)
- Guaranteed capital or fixed return on capital (would convert it into ribā)
- Profit denominated in absolute amounts rather than percentages
- Withdrawal of capital before liquidation in a way that disturbs profit attribution
- Commingling without consent in restricted muḍārabah
Step-by-Step Flow
- 1
Mandate & Investment Policy
Define restricted vs unrestricted muḍārabah, sectors, instruments, geography.
- 2
Capital Contribution
Rabb al-Māl transfers capital in agreed currency and form.
- 3
Investment Deployment
Muḍārib invests within mandate; activity log maintained.
- 4
Periodic Valuation
Mark-to-market or constructive valuation; profit/loss provisional.
- 5
Profit Distribution
On realisation/liquidation, profit shared per ratio; loss borne per Shariah rules.
- 6
Termination
Closing reconciliation, audit and final settlement.
Standard Document Set
The proposed Muḍārabah structure is reviewed and found compliant with applicable Shariah principles subject to the conditions stated herein.
Reviewed under OSAS-MUD™ · AAOIFI Shariah Standard No. 13 — Muḍārabah
Reviewed and Approved by Abdul-Azeez Onike Morufu — Registered Shariah Adviser, Securities Commission Malaysia
Advisory Subset of OFIS™
OSAS™ · Onike Shariah Advisory Standards
Reviewed and Approved by Abdul-Azeez Onike Morufu — Registered Shariah Adviser, Securities Commission Malaysia
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