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Mudarabah is a kind of partnership in which a bank gives money to another (Mudarib) for investing in commercial enterprises. The profits generated are distributed on a predetermined ratio while the loss is assumed by the investor in money terms and management in service provided/effort terms.
Musharakah is a partnership or joint enterprise structure in Islamic finance. It is where partners share in the losses and profits of an enterprise. Islamic law, known as Sharia law, doesn’t permit profiting from interest in lending. Musharakah is a type of shirkah al-amwal, which means partnership.
