Mudarabah And Jersey Limited Partnerships

By Simon Howard

Islamic financing emphasises the importance of a genuine assumption of risk on the part of the financier to justify reward and a mudarabah is one of the legal forms used in Islamic financing to establish a risk-sharing venture. It is possible to establish limited partnerships in Jersey (JLP) that qualify simultaneously as mudarabah in accordance with the standards defined by Shariah Standard No 13 of the Accounting and Auditing Organisation for Islamic Institutions.

Islamic origins of the limited partnership concept

Structuring a JLP so as to qualify simultaneously with the requirements for a mudarabah reflects the closeness of these two concepts; indeed it points towards the almost certain fact that the commandite or limited partnership concept that has been developed across Europe since medieval times has its origins in the mudarabah. It was copied and developed as part of European commerce in the Middle Ages by Italian merchant venturers