Mudarabah Rail

Profit-sharing partnership contract endpoints for Islamic investment finance.

Overview

The Mudarabah rail provides:

Profit-sharing investment contract creation and management
Capital provider (Rabb al-Mal) and entrepreneur (Mudarib) role management
Profit distribution calculation and disbursement
Loss allocation enforcement (borne by capital provider only)

Mudarabah is a trust-based partnership where one party provides the capital (Rabb al-Mal) and the other provides expertise and management (Mudarib). Profits are shared according to a pre-agreed ratio, while financial losses are borne solely by the capital provider unless the Mudarib is negligent.

This contract is fundamental to Islamic banking, forming the basis of investment deposits, fund management, and venture financing. The Mudarib contributes labor and expertise rather than capital, and may not guarantee the capital or a fixed return.

Mudarabah contracts can be restricted (Mudarabah Muqayyadah), where the capital provider specifies the type of business, or unrestricted (Mudarabah Mutlaqah), where the Mudarib has full discretion over investment decisions.

Endpoints

Create Mudarabah Contract

POST /v1/rails/mudarabah/contracts

const contract = await iof.mudarabah.create({
  investment_description: "SME trade finance portfolio - Q1 2025",
  mudarabah_type: "restricted",
  capital_amount: 500000,
  currency: "USD",
  rabb_al_mal_id: "cpty_institution",
  mudarib_id: "cpty_fund_mgr",
  profit_sharing: {
    rabb_al_mal_ratio: 0.6,
    mudarib_ratio: 0.4,
  },
  investment_period_months: 12,
  restrictions: ["trade_finance", "halal_commodities"],
});

Response:

{
  "id": "mdb_xyz",
  "type": "mudarabah",
  "subtype": "restricted",
  "status": "DRAFT",
  "capital_amount": 500000,
  "currency": "USD",
  "profit_sharing": {
    "rabb_al_mal_ratio": 0.6,
    "mudarib_ratio": 0.4
  },
  "investment_period_months": 12,
  "created_at": "2024-01-15T10:30:00Z"
}

Get Mudarabah Contract

GET /v1/rails/mudarabah/contracts/:id

List Mudarabah Contracts

GET /v1/rails/mudarabah/contracts

Execute Mudarabah Contract

POST /v1/rails/mudarabah/contracts/:id/execute

Distribute Profit

POST /v1/rails/mudarabah/contracts/:id/distribute-profit

Contract Types

Type	Description
`restricted`	Capital provider specifies permitted business activities
`unrestricted`	Mudarib has full discretion over investment decisions

Contract Status

Status	Description
`DRAFT`	Contract created, pending review
`PENDING_SHARIAH_REVIEW`	Awaiting Shariah board approval
`SHARIAH_APPROVED`	Approved by Shariah board
`ACTIVE`	Capital deployed, investment active
`COMPLETED`	Investment matured, profits distributed
`TERMINATED`	Contract terminated early

Shariah Compliance

Profit-sharing ratios must be agreed at inception as a percentage, not a fixed amount
The Mudarib may not guarantee the capital or promise a fixed return
Financial losses are borne solely by the capital provider (Rabb al-Mal)
The Mudarib loses only their time and effort in case of loss (unless negligent)
Capital must be in a known, liquid form at the time of contract

Webhooks

Event	Description
`mudarabah.contract.created`	Contract created
`mudarabah.contract.executed`	Capital deployed
`mudarabah.profit.distributed`	Profit distributed
`mudarabah.contract.completed`	Investment matured
`mudarabah.contract.terminated`	Contract terminated

Standards

Next Steps

Musharakah Rail - Equity partnership finance
Diminishing Musharakah Rail - Declining partnership
Wakalah Rail - Agency-based investment
Contracts Rail - General contract management