The "Muḍāraba" Facility: Evolution, Stasis and Contemporary Revival

The age-old concept of partnership was seen by Muslim jurists from the 8th century Hijra onwards as a sacrosanct commercial arrangement—and, therefore, subjected to a form of fixity which is unparalleled in any other religious tradition. Since the formative period of Islamic law, the limited-liability partnership, or muḍāraba, a specific variation of the over-arching mushāraka partnership, has continued to hold central importance for Muslims. Yet, despite this centrality, it has not been examined with a view to reformulating it for contemporary Islamic banking and finance. This has led to its virtual neglect in modern Islamic banking operations. This article suggests that the revival of the muḍāraba facility requires the overcoming of key disadvantages inherent in its structure and that a restructuring on the basis of the hybrid facility called participating preferred ijāra is one possible way of achieving such an outcome.