Mudarabah Financial Sharing ( MFS )

Abstract

Mudarabah Financial Sharing (MFS) provides an opportunity for depositors to participate in commercial (buy and sell) projects. This method is a financial subsystem of Rastin Profit and Loss Sharing (PLS) banking system and in this connection, the instructions, organizations; working procedures, electronic bases, contracts and related forms are highly similar to Rastin PLS base system. The basis for determining rate of return in this kind of sharing is the yield rate in real sector economy and bank receives commission for providing capital management services for depositors as an agent or attorney, and works as an intermediary of funds to allocate depositor’s funds into Mudarabah commercial activity of entrepreneur. Bank distributes the outcome of the project to depositors and agent/entrepreneur (Mudarib). MFS uses the financial innovations of “Mudarabah Certificate” and “Periodic Mudarabah Certificate”. Depositor receives a Mudarabah Certificate when joins to a special Mudarabah project that can be transacted in Rastin Certificate Market. Profit or loss share is paid to the latest holder of certificate after the end of project. Profit share settlement between the Mudarabah Certificate holder and Mudarib (agent or entrepreneur of the project) will be based upon neoclassic theory of shares of factors of production, and specifically on the Euler theorem of income distribution.