In Islamic Banking, ‘Mudarabah’ is best defined as a financial partnership where:

ABoth parties contribute capital and share profits and losses equally

BOne party provides capital (Rab-ul-Mal) and the other provides management/expertise (Mudarib)

CA bank purchases goods and resells them at a cost-plus profit margin

DFunds are held in pure trust without profit allocation

Explanation

Mudarabah is a profit-sharing trust financing partnership where capital owner provides funds and entrepreneur manages project.

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