Difference between Musharaka and Mudaraba
Mudaraba
In mudaraba, it falls on the mudarib to
provide for all labor requirements (the
other partner's contribution is generally
confined to providing capital).
Entitlement to a share of profit in
musharaka is based on the capital
contribution of all partners whether in
the form of cash, goods, tangible
assets, services or creditworthiness (in
case sharika is based on reputation).
The subject of the musharaka contract
is some form of capital contribution.
Mudaraba is a partnership in profit in
which one partner provides capital (rab
al-mal) and the other provides labor
and business expertise (mudarib). In
essence, mudaraba is a special case of
musharaka (or sharika), with each type
of contract having its distinguishing
features.
Losses are faced only by the capital
provider.
Musharaka
In musharaka, the labor (including
management skills and business
expertise) is to be provided jointly by
the parties (partners),
Entitlement to a share of profit in a
mudaraba, on the other hand, hinges on
two elements
1) The existence of capital (subject
to the conditions of musharaka
capital).
2) The work undertaken by the
mudarib (a type of contribution
that is different from the
mudaraba capital).
Musharaka is an agreement between
two or more partners to combine their
assets, services, obligations or
liabilities for the purpose of making
profit.
Losses are Shared among all.