Fiqh al-Mudarabah al-Mutlaqa — Unrestricted Profit-Sharing Partnership in Islamic Finance: How the Unrestricted Mudarabah (Where the Rabb al-Mal [Capital Provider] Places No Geographic, Sectoral, or Temporal Restrictions on the Mudarib [Working Partner]) Differs From Mudarabah al-Muqayyada (Restricted Mudarabah), Why Islamic Investment Deposits and Sukuk al-Mudarabah Use This Structure, and the Profit-Loss Sharing Ratios and Capital Guarantee Issues

Fiqh al-Mudarabah al-Mutlaqa (فِقهُ المُضَارَبَةِ المُطلَقَة — Jurisprudence of the Unrestricted Mudarabah; *mudarabah*: from *d-r-b*: to strike [the road, i.e. to travel for trade]; a profit-sharing arrangement in which: [a] the rabb al-mal [capital owner] provides capital; [b] the mudarib [working partner] provides labor and management; [c] profits are shared according to a pre-agreed ratio [e.g. 70% rabb al-mal, 30% mudarib]; [d] losses fall entirely on the rabb al-mal [the capital owner loses capital; the mudarib loses labor]; the two types: [1] mudarabah al-mutlaqa [المُضَارَبَةُ المُطلَقَة — unrestricted mudarabah]: the rabb al-mal places NO restrictions on how, where, or when the mudarib invests the capital; the mudarib has full discretion to conduct any lawful business; [2] mudarabah al-muqayyada [المُضَارَبَةُ المُقَيَّدَة — restricted mudarabah]: the rabb al-mal specifies restrictions: [a] geographic [invest only in Malaysia]; [b] sectoral [invest only in real estate]; [c] temporal [deploy the capital within 6 months]; [d] counterparty [invest only with Company X]; the mudarib must honor these restrictions; liability for breach: if the mudarib violates a muqayyada restriction, the mudarib becomes personally liable for losses [the protection of unlimited-lender protection is lost]; the classical sources: the mudarabah [also called qirad in Maliki/Shafi'i terminology] has been practiced since pre-Islamic times; the Prophet's marriage to Khadija [who was a merchant and conducted qirad arrangements with agents] is cited as evidence of its Islamic permissibility; Imam Malik transmitted multiple accounts of the Companions using qirad; modern applications of mudarabah al-mutlaqa: [1] Islamic investment deposit accounts: a depositor places money in an Islamic bank under mudarabah al-mutlaqa; the bank is the mudarib; the depositor is the rabb al-mal; the bank invests in a diversified portfolio; profits are shared per the agreed ratio; the depositor bears loss of principal [no capital guarantee]; [2] sukuk al-mudarabah: sukuk [Islamic bonds] structured on mudarabah give sukuk-holders the rabb al-mal position; the issuer [typically a company or government agency] is the mudarib; sukuk-holders receive their share of profits; [3] two-tier mudarabah: in some structures, the bank acts as mudarib for depositors [tier 1] while simultaneously acting as rabb al-mal in mudarabah arrangements with entrepreneurs [tier 2]; the bank earns a mudarib share from the entrepreneur while sharing profits with depositors per their agreement; the capital guarantee controversy: the prohibition on the rabb al-mal guaranteeing capital to depositors is among Islamic banking's most commercially sensitive issues; [a] a pure mudarabah means depositors can lose principal; [b] most depositors are unwilling to accept this; [c] regulatory authorities in many jurisdictions require deposit insurance [incompatible with pure mudarabah]; [d] various structures have been developed to approximate capital protection within the Islamic framework, though purists object; profit-sharing ratios: the ratio is negotiated at contract formation; can be any agreed ratio; must not specify a fixed sum [that would be riba]; '70/30 split of net profits' is valid; 'rabb al-mal gets USD 1,000 per year' is not valid) is Islamic finance's foundational profit-sharing investment structure.