A Jurisprudential Analysis of the Commitment to Pay a Fixed Profit Rate in Bank Mudarabah Contracts: A Case Study of Article 13 of the Executive (Operational) Contracts

Banking mudarabah is undoubtedly derived from Islamic mudarabah, and the legislator has sought to ensure compliance with the principles governing this contract from an Islamic perspective. However, an examination of Islamic banking practices and the provisions of the executive banking mudarabah contract approved by the Money and Credit Council on 19/8/1394 (Iranian calendar) suggests that banking mudarabah may, in certain respects, be inconsistent with its Sharia-based counterpart. One such concern is that, under Islamic mudarabah, each party’s share of the profit is determined after the profit has materialized at the conclusion of the commercial venture, whereas in contemporary banking, profit is calculated from the outset on the basis of the principal capital. This raises the question of whether such a banking practice is jurisprudentially valid and, if not, what solutions may be proposed. This study critically examines the issue by drawing on the views of experts and scholars. Using a descriptive-analytical method, the study concludes that merely stipulating a specific profit rate in a mudarabah contract does not necessarily conflict with the nature of mudarabah, given that the characterization of undivided co-ownership (isha‘a) as an essential requirement of the contract has not been established, and the expression “al-ribḥ baynahumā” (“the profit is between them”) does not indicate how the profit must be allocated.Nevertheless, the analysis of Article 13 requires a distinction between specifying an expected profit rate and guaranteeing a definite profit. Setting a specific rate does not necessarily contravene mudarabah, provided that the bank’s entitlement remains contingent upon the realization of actual profit. By contrast, an agent’s unconditional commitment to pay profit irrespective of the outcome of the economic activity is incompatible with the nature and legal rules of this contract. Accordingly, reforming contractual mechanisms, settling accounts on the basis of actual profits, and supervising contract implementation are essential.