Posted on 06/08/2012 by marina

In the language of the law, Muzarabah signifies a contract of co-partnership, of which the one party (namely the proprietor) is entitled to a profit on account of the stock, he being denominated Rabbu l-Mal, or proprietor cut’ the stock (which is termed Rasu ‘l-Mal), and the other party is entitled to a profit on account of his labour, and this last is denominated the muzarib (or manager), inasmuch as he derives a benefit from his own labour and endeavours. A contract of muzarabah therefore, cannot be established without a participation in the profit, for if the whole of the profit be stipulated to the proprietor of the stock, then it is considered as a biza’ah or, if the whole be stipulated to the immediate manager, it must be considered as a loan.

Based on Hughes, Dictionary of Islam