Chapter on Qirāḍ (silent-partnership investment) or Muḍāraba

Introduction

Qirāḍ—pronounced with a kasra on the qāf and a light, open rāʾ—is derived from qarḍ, “cutting.” The Arabs say qārada, yuqāridu, qirāḍan wa muqāraḍatan, meaning: he “cut off” a portion and handed it over to someone so that the latter might trade with it.

Muḍāraba is a reciprocal form taken from ḍarbu fīl-arḍ, “striking out in the land,” that is, journeying through it in search of livelihood.

Such, then, is their linguistic origin.

As for their legal or technical definition, both terms denote the same arrangement.

Qirāḍ: a person gives another his capital—or part of it—to trade with, and the two share the profit according to whatever ratio they stipulate.

Muḍāraba: a partnership contract between two parties, one providing the capital and the other the labor; the working partner trades with the money, and any profit is divided between them as agreed.

If the venture incurs a loss, the capital owner loses his money (or a portion of it) while the worker loses his effort. From this it is clear that qirāḍ and muḍāraba are synonymous in meaning.

Muḍāraba, or qirāḍ, is permissible by evidence from the Qur’an, the Sunnah, scholarly consensus, analogy, and the presumption of original permissibility.

1. Qur’an: the Almighty says, “Indeed, many partners wrong one another, except those who believe and do righteous deeds—and how few they are” (38:24).

2. Sunnah: among the proofs is the report recorded by Imām Aḥmad (16380) and Abū Dāwūd from the ḥadīth of