Zaid gave Bakr 100 rupees to start a business and invest the money via a Mudharabah contract. It was also stipulated that Bakr will receive 60% of any profit while Zaid will receive 40%, and that Zaid will also be responsible for the fulfillment of any loss. And if the loss amounts to half of Zaid’s share (i.e. 20%) or more, then Zaid will be responsible for its fulfillment but for that month he will receive 60% and Bakr will receive 40%. What is the ruling regarding this? Meaning, will it be permissible to change the percentage of their share when the loss is equal to or more than Zaid’s share?
الجواب حامدا و مصلیا
Of the requisites of any Mudharabah contract is that if there is a loss, it should firstly be fulfilled from the profit, and if it cannot be fulfilled from the profit (i.e. the loss is more than the profit), then the loss will be borne by the Rabul Mal (Investor), not the Mudharib (entrepreneur). For this reason, it will not be permissible to exchange the stipulated ratios if there is a loss, as mentioned in the inquired about scenario. However, after fulfilling the loss from the attained profit, whatever remains of the profit will then be shared between the Rabul Mal (Investor) and the Mudharib (entrepreneur) based on their stipulated ratio.