Losses affecting the muḍārabah capital are borne by the capital owner alone. The working partner (muḍārib) is not answerable for such losses unless he exceeds the limits regarding the capital or falls short in safeguarding it, for the muḍārabah capital remains the property of its owner. The muḍārib is its trustee so long as he seeks to increase it, and he is an agent in managing it; both an agent and a trustee are liable only in cases of misconduct or negligence.

In banks and financial institutions that possess juridical personality, the party responsible for what transpires is the board of directors, because it serves as the shareholders’ agent in running the company and represents the juridical person. The circumstances in which the board is liable for losses to muḍārabah funds are identical to those in which a natural-person muḍārib would be liable. Accordingly, the board is accountable before the capital providers for any loss to the muḍārabah capital arising from its own wrongdoing or negligence, or that of the institution’s employees; any indemnity owed by the board must come out of the shareholders’ assets. If the wrongdoing or negligence is traceable to a specific employee, the board must hold that employee to account; but if the wrongdoing or negligence lies with the board itself, the shareholders have the right to call it to account.

May blessings and abundant peace be upon our master Muhammad, his family, and his Companions, and all praise is due to Allah, Lord of all worlds.