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Mudaraba Structure in Islamic Funds

The structure of an Islamic fund is determined by the contract between investors and fund managers. There are three main structures: mudaraba, wakala, and musharaka. Mudaraba involves a partnership where one party provides the funds and the other manages them, with profits shared at a predetermined ratio but losses borne solely by the fund provider. Wakala appoints an agent to invest on behalf of the principal for a set fee. Musharaka is a temporary partnership where both parties provide capital and share profits and losses.

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Philip Kotler
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14 views8 pages

Mudaraba Structure in Islamic Funds

The structure of an Islamic fund is determined by the contract between investors and fund managers. There are three main structures: mudaraba, wakala, and musharaka. Mudaraba involves a partnership where one party provides the funds and the other manages them, with profits shared at a predetermined ratio but losses borne solely by the fund provider. Wakala appoints an agent to invest on behalf of the principal for a set fee. Musharaka is a temporary partnership where both parties provide capital and share profits and losses.

Uploaded by

Philip Kotler
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Structure of islamic

fund
The contract between an investor and fund
managers help determine the structure of an
islamic fund.
An islamic fund can
have 1 out 3 structures.
Those are
1 mudaraba
2 wakala ( investment
agent )
3 musharaka
Mudaraba structure

It's partnership between


2 parties.
One party provides fund
and the other party
manages the fund .
Characteristics

Both parties share the profits at a predecided


ratio.
Profits can be shared periodically.
In case of loss, the fund provider bears all the
losses.
Wakala structure
In a permissible dealing ,The wakil ( agent)
represents and deals for the principal.

The principal appoints his agent at a predetermined


fee.
The principal gives his agent power of attorney and
sets the condition for investment.
The agent is considered as a trustee and can not be
held liable for anything except negligence of duty.
Musharaka structure
Musharaka (sharikatul al-inan) is a partnership
between two or
more parties whereby each partner contributes a
specific amount of
money in a manner that gives each one a right to
deal in the assets of
the partnership.
Characteristics
It's a temporary partnership between investors and
fund managers for a certain period.

Both parties provide capital and share profit/loss.

The profit ratio can be fixed or can be based on


performance
.

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