If all partners work they are deemed to be agents of

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If all partners work, they are deemed to be agents of each other and their actions are deemed to be authorized by others. Islamic Banking Musharakah & Mudarabah 21
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Basic Rules of Musharakah Termination of Musharakah Every partner has a right to terminate. Partners can either distribute assets among themselves or sell them and distribute proceeds If there is a dispute, then distribution is preferred. In case of non-divisible assets, sale proceeds are required. If a partner dies, musharakah stands terminated. His heirs have the option to carry on or take out his share. If a partner becomes incapable of making commercial transactions, musharakah is terminated. Islamic Banking Musharakah & Mudarabah 22
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Basic Rules of Musharakah Termination of Musharakah without closing business If one partner opts out, others can buy his share. It can be pre-agreed at the time of the contract that liquidation can only be done if all or majority of partners agree and that the leaving partner cannot force liquidation. Islamic Banking Musharakah & Mudarabah 23
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Basic Rules of Musharakah “All the conditions agreed upon by the Muslims are upheld, except a condition which allows what is prohibited or prohibits what is lawful.” Hadith Islamic Banking Musharakah & Mudarabah 24
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Mudarabah
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Mudarabah Scheme Islamic Banking Musharakah & Mudarabah 26 Rabb-ul-Mal Capital Provider Mudarib Provides Expertise
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Mudarabah Both parties are on equal footing to decide profit sharing ratio Both will loose in case of a loss Capital Provider will suffer reduction of investment Mudarib will suffer loss of reward for time and effort Both are held responsible on their breach of contract If there is negligence on part of manager, he has to return the whole capital If the capital provider withdraws earlier, he has to pay the reward to manager Islamic Banking 27
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Islamic Banking 28 Who will tell the concept of a ‘Triple Mudarabah’
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Depositor Bank Mudarib Bank Business Mudarib Triple Mudarabah Islamic Banking 29 The Depositor & Bank are in partnership, loss to be borne by the Depositor since Bank is just a Mudarib The Bank & Business are in partnership, loss to be borne by the Bank since Business is just a Mudarib
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Triple Mudarabah Islamic Banking How was ‘Ship Owning’ a Mudarabah in the 15 th century?
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Differences in Musharakah & Mudarabah Islamic Banking Musharakah & Mudarabah 31 Musharakah All partners provide capital Profits and losses are shared by all partners All partners can participate in management of business Unlimited liability of partners in case liabilities exceed assets All assets are jointly owned by all partners, so appreciation is for all Mudarabah Capital is only provided by Rabb-ul-Mal Profits are shared by both, losses to be borne only by rabb-ul-Mal Rabb-ul-Mal cannot participate in management of business Limited liability of Rabb-ul-Mal unless mudarib is allowed to incur liabilities Assets are owned by Rabb-ul-Mal and Mudarib can only get a share in profit
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