Partnership and Mudaraba

Question

Question: Zayd, ʿUmar, Bakr and Khalid, all four together, opened a cloth shop. The four of them gave it to a fifth person, Mahmud, to run; this Mahmud is not a partner in the shop — only in return for running it he will receive half of the profit, and the remaining half will be divided among the partners. After that, half of the profit proved insufficient for Mahmud, so he said to the partners: “Fix a monthly salary for me on top of the half share.” The partners replied that this arrangement is not permissible.

Answer

(1) For a mudaraba it is necessary that cash be handed over to the mudarib (working partner) and that he himself purchase the goods. Hence, if these four partners bought cloth, set up the shop and then gave the shop to Mahmud to run, the mudaraba was not valid: Mahmud does not share in its profit, but is entitled to the standard wage (ajr al-mithl — the wage customary for such…

Source: Fatawa Mahmudiyya

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