What Is Modaraba?

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What Is Modaraba?

5 Answers

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Answer 1

Modaraba is a form of contract a subscriber participates with his money and the manager with his efforts and skills, after setting aside the agreed share of Modarib the profits earned on investments are distributed among the subscribers.

In simple words, Modaraba means a business in which a subscriber participates with his money and the manager participates with his knowledge and skill, and profits on investment made out of the Modaraba funds are distributed among the subscribers. Thus, it is a concept of Islamic finance through which one partner or more participate with the funds and another with his skill and efforts in some trade, business and industry permitted by Islam. They who participate with their efforts assume the role of manager, while the provider of funds becomes the beneficial owner. In modern terminology, a "modaraba' is akin to the concept of mutual funds minus its unIslamic features. The concept of mutual funds has gained widespread acceptance in the country as is evident by the success of N.I.T. units and I.C.P. mutual funds.

In view of this back ground, it appears that the institutions of modaraba will play a vital role in mobilizing savings in the society and diverting them into productive channels of investments in the economy.

Answer 2

Modaraba is a term that is widely used in Islamic banking and it is used instead of interest. As interest is not considered a legal profit in Islam therefore, Islamic banks operate with the concept of Modaraba. According to this terminology two parties negotiate and one party gives the money (investor) to the other part (mudarib). Instead of inetrest there is a profit that is known as Modaraba. It was first introduced when there was a sudden boom in the Islamic banking in the world and it is considered very important because the Muslim community all over the world now want to finance in Islamic banking only.
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Answer 3

Modaraba is islamic finance

Answer 4

The business which the subscribes (bank) participate with the money and the manage (client) with the knowledge and skills

Answer 5

Modarba is Islamicized word for interest. Some clever people illegally use it to dupe gullible and ignorant people to rip them off their money in the name of Islam by offering predetermined prefixed rate of return and offering no collaterals or tangible security. Unlike banks which are authorised orgs to carry on modarba under the cover of Islam but where money invested is rather safe, people indulged in it are conducting this business unauthorizedly and are not able to return the principaL amount on demand or through any good schedule.
Modarba is risky but the higher rate of return lures gullible people with savings to get trapped by it. There have been many cases of it in Pakistan and the evil still flourishes in the society unchecked..