1. Is it permissible for me to charge my clients with entry, ongoing (for the investment service that I provide) and exit fees? If so, is there any limit to the amount that I can charge?
2. Between my clients and I, can we agree on a profit sharing ratio, e.g. 70-30?
3. Would it be permissible for me to add the following term into my contracts: “The higher the amount invested, the lower the fee charged”
It is necessary for the validity of mudarabah that the parties agree, right at the beginning, on a definite proportion of the actual profit to which each one of them is entitled. No particular proportion has been prescribed by the Shariah; rather, it has been left to their mutual consent. They can share the profit in equal proportions (i.e. 50/50), and they can also allocate different proportions for the rabbul maal and the mudarib (such as 70/30 or 40/60 etc.). However, they cannot allocate a lump sum amount of profit (such as $1,000) for any party, nor can they determine the share of any party at a specific rate tied up with the capital (such as 25% of the capital).
If there is any loss in mudarabah, it will be solely borne by the rabbul maal, as the mudarib did not invest anything. The loss of the mudarib is restricted to the fact that his effort was unproductive and his labour has not brought any fruit to him. This is with the condition that the loss was not due to negligence or misconduct of the mudarib. If it is proven that the loss was due to the negligence and misconduct of the mudarib, then he will be liable for the loss of the mudarabah capital.
If the business incurs loss in some transactions and gains profit in some others, then the loss is first and foremost deducted from the profits, and thereafter from the capital amount.
If the business makes profits for first couple of months and then incurs a loss, then this loss will be first deducted from the profits from previous months. If these profits have been given out to the parties then they will have to pool back the profits and calculate “net profit”. Then this “net profit” can be shared in the agreed ratio between the rabbul maal and the mudarib. In case there is a “net loss” then this loss will be taken out from the capital, and the mudarib will not earn anything.
Apart from the agreed proportion of the profit, the mudarib cannot claim any salary or fee or remuneration for the work done by him for the mudarabah.
After this brief introduction to the basics of mudarabah, we address your queries hereunder:
1) As mentioned above, apart from the agreed proportion of the profit, the mudarib cannot claim any salary or fee or remuneration for the work done by him for the mudarabah. Hence, you are not allowed to charge your clients any fees.
2) Yes, you may mutually agree on any profit sharing ratio.
3) As mentioned in answer 1, you cannot charge any fees.
For more details on mudarabah, click on the following link:
Also, you may read detailed guidelines for mudarabah as well as musharakah partnership at: