IBANK 7.5.10 Operational risks—mudarabah

(1) In a mudarabah contract, an Islamic banking business firm provides financing on the basis of a profit-sharing and loss-bearing contract.
(2) The firm's customer (as mudarib) is not required to bear any losses, in the absence of negligence, misconduct, fraud or breach of contract on its part. The customer is required to act in a fiduciary capacity as the manager of the firm's funds.
(3) The absence of the firm's right to control the management of the enterprise as capital provider (rabb al-mal) may give rise to operational risk.
(4) The customer may fail to provide the firm with regular, adequate and reliable information about the financial performance of the venture.
(5) The firm may fail to carry out adequate due diligence on the customer or the financed venture.
Derived from QFCRA RM/2015-2 (as from 1st January 2016)
Amended by QFCRA RM/2020-3 (as from 1st January 2021)