If a mudarabah partnership incurs a loss, how is the money divided between the owner of the capital and the owner of the effort?
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The questioner : His EminenceThe Shaykh : 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 Shaykh : Mudarabah means that 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 mudarabah. So one provides the money and the other provides the work. If the trade profits, the profit is divided according to what? What they agreed upon. Let us say, for example, that they agreed that the profit would be in halves. He gave him one hundred thousand and said: Take it and trade with it as a mudarabah; you have half the profit and I have half. So the hundred thousand became two hundred. How much does the worker get? Fifty thousand. And the owner of the money gets fifty thousand. The worker profited through his labor, and the owner of the money profited through the money that this mudarib employed. If the merchandise is lost, meaning he worked with one hundred thousand but it was lost due to falling prices until it became eighty thousand, how much is the loss? Twenty thousand. Do we say that the worker bears ten thousand and the owner of the money bears ten thousand, or does the owner of the money bear it all? The owner of the money bears it all. The owner of the money lost the money, and the worker lost his work, toiling by night and day, traveling and staying in places.
Some people say to the worker: If you incur a loss, the loss is between us. This condition is defective and not valid, because it leads to this worker bearing more than his work, and this is not permissible. Is that clear? Good.
And with this, the session or this meeting ends, because the mu'adhdhin is saying: Hurry to the prayer. So we ask Allah to help us and you with that.
The Shaykh : Mudarabah means that 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 mudarabah. So one provides the money and the other provides the work. If the trade profits, the profit is divided according to what? What they agreed upon. Let us say, for example, that they agreed that the profit would be in halves. He gave him one hundred thousand and said: Take it and trade with it as a mudarabah; you have half the profit and I have half. So the hundred thousand became two hundred. How much does the worker get? Fifty thousand. And the owner of the money gets fifty thousand. The worker profited through his labor, and the owner of the money profited through the money that this mudarib employed. If the merchandise is lost, meaning he worked with one hundred thousand but it was lost due to falling prices until it became eighty thousand, how much is the loss? Twenty thousand. Do we say that the worker bears ten thousand and the owner of the money bears ten thousand, or does the owner of the money bear it all? The owner of the money bears it all. The owner of the money lost the money, and the worker lost his work, toiling by night and day, traveling and staying in places.
Some people say to the worker: If you incur a loss, the loss is between us. This condition is defective and not valid, because it leads to this worker bearing more than his work, and this is not permissible. Is that clear? Good.
And with this, the session or this meeting ends, because the mu'adhdhin is saying: Hurry to the prayer. So we ask Allah to help us and you with that.