Șukūk al-Muḍārabah and Application of Third-Party Guarantee

Abstract

This paper explores importance of Șukūk al-Muḍārabah in Islamic capital movement and its suitability for financing projects which individuals are not able to provide capital for them. Șukūk al-Muḍārabah is the most popular Șukūk in Șukūk market which has been structured to provide funds for the big projects which need huge amount of capital. This paper analyses the nature, salient features, and the process of Șukūk al-Muḍārabah. The paper uses qualitative methodology which isbased on the four prominent schools of fiqh and some contemporary scholars. The paper examines to what extent the permissibility of third party guarantee in Șukūk al-Muḍārabah process due to the crucial role that this guarantee plays in protection of Șukūk transaction which exposes to risk transaction. It was found in this paper that application of third party guarantee is permissible in the Șukūk al-Muḍārabah process if it is done without charging a fee.