Blog Crowdfunding Syariah Islamic Economics Muamalah Fiqh

Mudharabah in Islamic Bank

Devin Halim Wijaya26 December 2025

18 4 minutes read

Mudharabah is a key concept in the Islamic business and economic system. This contract serves as a foundation for financing and fundraising instruments in the Islamic financial industry. Based on profit-sharing based on business performance, the Mudharabah contract is considered fairer and more equitable than conventional interest-based lending systems, which burden business managers in the event of adverse events. This concept is in accordance with the principle of transaction fairness mentioned in Surah An-Nisa verses 29-30:

يَا أَيُّهَا الَّذِينَ آمَنُوا لَا تَأْكُلُوا أَمْوَالَكُم بَيْنَكُم بِالْبَاطِلِ إِلَّا أَن تَكُونَ تِجَارَةً عَن تَرَاضٍ مِّنكُمْ ۚ وَلَا تَقْتُلُوا أَنفُسَكُمْ ۚ إِنَّ اللَّهَ كَانَ بِكُمْ رَحِيمًا • وَمَن يَفْعَلْ ذَٰلِكَ عُدْوَانًا وَظُلْمًا فَسَوْفَ نُصْلِيهِ نَارًا ۚ وَكَانَ ذَٰلِكَ عَلَى اللَّهِ يَسِيرًا

“O you who believe, do not consume one another’s wealth unjustly, except by trading with mutual consent. And do not kill yourselves. Indeed, Allah is Most Merciful to you. Whoever does that excessively and unjustly, We will surely consign him to the Fire. And that is easy for Allah.”

Also read: How to View Loss Sharing in a Mudharabah Contract from the Income Statement

But sometimes we ask, “How Mudharabah concept being practiced in the real world?”. This article will explain how Mudharabah concept being practiced in Islamic bank in terms of funding and financing along with the examples of it.

Mudharabah Basic Concept

Mudharabah in Islamic jurisprudence has the following definition:

المضاربة وتسمى قراضا أيضا , ومعناها أن يدفع رجل ماله إلى آخر يتجر له فيه على أن ما حصل من الربح بينهما حسب ما يشترطانه.

“Mudarabah, also known as qirad, means that someone entrusts their assets to another person to trade on their behalf, with the condition that the profits are divided between them according to their agreement.”

From the definition above, Mudharabah involves two parties: the Mudharib and the Shahibul Maal. The Mudharib is the business manager in the Mudharabah, and the Shahibul Maal is the funder in the business that is the object of the Mudharabah. Profits in the Mudharabah contract are shared based on an agreed-upon percentage of the business profit, known as the nisbah (profit sharing ratio), while financial losses are borne entirely by the investor. This is in accordance with the principle of fairness, where the Mudharib suffers losses from wasted business, while the Shahibul Maal suffers losses from lost capital.

Mudharabah Practices in Islamic Banking

Fundraising and financing are the two uses of mudharabah in Islamic banking. Islamic banks serve as the Mudharib in Mudharabah fundraising as they collect money from clients like us and allocating it through a variety of Islamic investment and financing options. When it comes to financing Islamic banks serve as Shahibul mal giving money to companies that require it.

The Mudharabah-based Islamic savings account is the first Islamic bank fundraising product based on the Mudharabah contract. Under the terms of the Mudharabah contract this product is allowed to give clients profit sharing In contrast to Wadiah-based savings accounts do not permit account holder returns. Protection from the Deposit Insurance Corporation is a benefit of this product because it is still regarded as a savings account. But compared to other investments the profit rate of this product is usually less. For example, we can come to Islamic bank and open an account for Mudharabah saving account, and usually for this type of account we can get revenue sharing of 13% and that might equal 0,5-3% per annum.

The Mudharabah-based Islamic deposit is the second Islamic bank fundraising product that is based on the Mudharabah contract. Under the terms of the Mudharabah contract, this Sharia deposit product offers clients profit sharing. Since sharia deposits lack the protection of a guarantee institution and have a set period of time during which funds must be deposited and not withdrawn they naturally offer customers a higher profit sharing than Mudharabah savings accounts. Usually in Indonesia, the return of Mudharabah deposits range between 4,5% up to 9%, which makes it a better choice for safe investment with acceptable return.

Mudharabah-based Islamic banking financing products come in two varieties. The first is Islamic working capital financing in which Islamic banks lend money to businesses looking to capitalize their stock or fund operational needs. The profit-sharing ratio is determined by the businesss profit or turnover during the financing period. The illustration of this type is:

“Muhammad corp is a company importing dates for domestic use. The company need additional money for stocks preparing for Ramadhan. They can come to Islamic bank to get working capital financing by Mudharabah with revenue share of 15% paid at the end of the financing period.”

The second product is Islamic investment financing in which Islamic banks provide funding to businesses for the development and acquisition of long-term assets in exchange for a profit share from the company’s overall revenue or the income from the acquired assets. The illustration of this type is:
“Suryana holding is a real estate holding company. The company wants to buy Hotel A in Jakarta and get another cashflow income. They can come to a Islamic bank and get a Mudharabah financing with revenue share of 20% for 10 years”.

Also read: Islamic Ruling on Mudharib (in Mudharabah) Taking Profits Before the Final Calculation

Conclusion

Mudharabah is a cooperation and business financing contract that is highly prioritized in Islamic economics. This contract represents the concepts of fairness and transparency that are highly prioritized in Islamic sharia. In adopting this contract, Islamic banks have developed various products, such as Mudharabah savings and deposits, to raise funds and finance working capital and Islamic investments. Hopefully, Muslims will increasingly encourage the use of this contract in their efforts to create madanic economy. Aameen.

Let’s Visit, Zeed and join for halal investment with Zeed.