Islamic modes are asset-based and entail real economic activity and undertaking responsibility or liability. The modes that form the basics of Islamic finance belong to participatory or profit/loss sharing (PLS) or risk-sharing techniques and as such are considered the most desirable modes by the majority of jurists on Islamic finance. Two contracts, namely Mudarabah and Musharakah, that lend themselves to the system of profit/loss sharing are based on the concept of Shirkah. In Musharakah all parties contribute to the joint business and work for it; in Mudarabah, one party contributes funds and the other acts as entrepreneur and the profit is shared in a predetermined, mutually agreed ratio.
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