Profit and Loss in a Mudarabah Partnership
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The questioner: Your Eminence, if a mudarabah partnership incurs a loss, how is the money divided between the owner of the capital and the one who worked with his effort?
The meaning of mudarabah is: You give a person money and say, "Take this money and trade with it, and the profit is between us, either in halves or thirds, according to what they agree upon: this is the mudarabah. One of them provides the capital, and the other provides the work. If the trade is profitable, the profit is divided according to what they agreed upon. Let us say they agreed that the profit would be in halves.He gave him one hundred thousand and said: Take it and trade with it in a mudarabah; you get half the profit and I get half the profit. So the hundred thousand became two hundred thousand. How much does the worker get? Fifty thousand, and the owner of the capital gets fifty thousand. The worker profited through his effort, and the owner of the capital profited through the capital that this mudarib used. And if the merchandise is lost,Meaning: He worked with one hundred thousand, but it was lost due to a drop in prices until it became eighty thousand. What is the loss? Twenty thousand.Do we say: Is it ten thousand on the worker and ten thousand on the owner of the capital, or is it all on the owner of the capital? The Shaykh: It is all on the owner of the capital. The owner of the capital lost the money, and the worker lost his work. He toils by night and day, travels, and some people say to the worker: If you lose, the loss is between us. This condition is not valid; because it leads to this worker paying more than his work, and this is not permissible.
And with this, this session ends. We ask Allah to help us and you.
The meaning of mudarabah is: You give a person money and say, "Take this money and trade with it, and the profit is between us, either in halves or thirds, according to what they agree upon: this is the mudarabah. One of them provides the capital, and the other provides the work. If the trade is profitable, the profit is divided according to what they agreed upon. Let us say they agreed that the profit would be in halves.He gave him one hundred thousand and said: Take it and trade with it in a mudarabah; you get half the profit and I get half the profit. So the hundred thousand became two hundred thousand. How much does the worker get? Fifty thousand, and the owner of the capital gets fifty thousand. The worker profited through his effort, and the owner of the capital profited through the capital that this mudarib used. And if the merchandise is lost,Meaning: He worked with one hundred thousand, but it was lost due to a drop in prices until it became eighty thousand. What is the loss? Twenty thousand.Do we say: Is it ten thousand on the worker and ten thousand on the owner of the capital, or is it all on the owner of the capital? The Shaykh: It is all on the owner of the capital. The owner of the capital lost the money, and the worker lost his work. He toils by night and day, travels, and some people say to the worker: If you lose, the loss is between us. This condition is not valid; because it leads to this worker paying more than his work, and this is not permissible.
And with this, this session ends. We ask Allah to help us and you.