investment partnership (مضاربة): The Basic Structure

1. What Is investment partnership (مضاربة)?

investment partnership (مضاربة) is a partnership with two distinct roles.
• capital provider (رب المال) provides the investment capital.
• managing partner (مضارب) manages the business and performs the work.
• Capital comes from one side, management from the other.

Term explanation: investment partnership (مضاربة): a partnership in which one party provides capital and the other manages the business.

• capital provider (رب المال)
• managing partner (مضارب)

2. Who Invests and Who Manages?

• In partnership (مشاركة), all partners may contribute capital and may participate in management.
• In investment partnership (مضاربة), capital is provided by the capital provider (رب المال).
• Management is carried out by the managing partner (مضارب).
• The capital provider (رب المال) does not manage the business in the basic investment partnership (مضاربة) structure.

3. Who Bears a Genuine Loss?

• In partnership (مشاركة), loss follows each partner's investment ratio.
• In investment partnership (مضاربة), genuine financial loss falls on the capital provider (رب المال) because he supplied the capital.
• The managing partner (مضارب) loses his time and effort because his work produced no profit.
• This rule assumes the managing partner (مضارب) acted with proper care.

4. Negligence and Misconduct

• Normal business loss is different from loss caused by fault.
• If the managing partner (مضارب) is negligent, dishonest or commits misconduct, he is liable for the loss caused by that fault.
• Business risk belongs to the investment; misconduct liability belongs to the person who caused it.

Keeping the legal roles clear prevents the arrangement from being treated like a fixed-return loan. Capital, management, ownership and profit entitlement should each follow the role actually undertaken.

Do not confuse genuine business loss with loss caused by negligence or dishonesty.

5. Liability: partnership (مشاركة) vs investment partnership (مضاربة)

• In normal partnership (مشاركة), excess business liabilities may fall on partners according to their shares.
• Partners may agree that no partner will incur debt on behalf of the business.
• A partner who violates that condition may bear the excess liability caused by his violation.
• In investment partnership (مضاربة), the capital provider (رب المال)'s normal liability is limited to his investment unless he authorized debt on his behalf.

6. Who Owns the Assets?

• In partnership (مشاركة), assets bought from the joint pool are jointly owned according to investment ratios.
• Partners can benefit from appreciation in those jointly owned assets.
• In investment partnership (مضاربة), goods purchased with the capital belong to the capital provider (رب المال).
• The managing partner (مضارب) normally earns through profit when the goods are sold profitably, not by claiming ownership in the assets themselves.

7. A Minority View on Natural Increase

Some jurists treated natural increase in capital as distributable profit.
• Example: the investment partnership (مضاربة) capital consists of sheep.
• Lambs are born during the investment partnership (مضاربة).
• Under this minority view, the lambs may be treated as profit and shared by the agreed ratio.
• This is not the main position used for ordinary appreciation of assets.

8. Level Summary

• capital provider (رب المال) provides capital; managing partner (مضارب) manages.
• Genuine financial loss falls on capital provider (رب المال); managing partner (مضارب) loses his effort.
• Negligence or misconduct can make the managing partner (مضارب) liable.
• capital provider (رب المال)'s normal liability is limited to his investment unless debt is authorized.
• investment partnership (مضاربة) assets belong to capital provider (رب المال); managing partner (مضارب) earns through agreed profit.

investment partnership (مضاربة) combines one party's capital with another party's management.