Mudarabah is a partnership between the fund provider and the user. Depositor here provides fund and the bank does business. Deposit provider is called “Shaheb Al-Mal” and the banker i.e user of fund is called “Mudarib“. As per shariah principles, the Mudarib will conduct the business independently following the Shariah principles and the shaheb al-mal will provide fund only. If the business earns any profit it will be distributed among the depositor and the bank as per pre-agreed ratio. But in case of loss it will go to the account of the shaheb al-mal. Mudarib i.e bank will not get any remuneration against it’s services.
In this mode of deposit the bank mobilizes major portion of it’s deposit. Earned profit is distributed among the bank and client on 35: 65 ratio in minimum. However bank may increase the client portion to provide higher profit rate to the depositor, if needed.