Modaraba’ denotes a business run in partnership where one or more partners do not actively take part in the activities of business. It is a partnership in profit between capital and efforts. In Modaraba, one party called ‘Rab-ul-Mal’ brings finances and the other party called ‘Modarib’ contributes his entrepreneurship and managerial efforts.

The proportionate share in profits of Modaraba is determined in any ratio by mutual agreement between parties. However, in case of loss under normal course of business, it is entirely borne by the capital investor, whereas the managing partner gets nothing for his efforts.