 In this module, we shall look at one model of Islamic microfinance and that model is based on Mudarabha. Just as a recap, we started with conventional microfinance, which is interest based. And then, we talked about some models of Islamic microfinance. We just listed them, Salam based, Mudarabha based, Murabha based, interest-free model, which is primarily being practiced in Pakistan and some other hybrid models are there as well. In this module, Mudarabha based model would be discussed. In case of microfinance Islamic based on Mudarabha, the finance provider provides cash to the recipient on Mudarabha based, as the name suggests. I hope that by now, you know what I mean by Mudarabha. So, I am not going to give you the definition of Mudarabha, because I have actually defined it at least 10 times, if not more. So, finance provider in this case is Rabbulmal and the finance receiver is Mudarabha. So, the party receiving microfinance is actually Mudarabha. And this is a very simple case of Mudarabha, one party providing capital and the other party using that capital to earn some profit, which is shared between the two parties. They share profit in accordance with an agreed profit distribution ratio. In the context of microfinance, this is normally 50-50. It could be any other figure, but it doesn't matter because microfinance uses Mudarabha in such a way that it becomes a compassionate arrangement between the provider of microfinance and the recipient of microfinance. At the end, when Mudarabha is wound up, then there is a very preferential treatment for the microfinance recipient, as I would explain in a bit. So, this is a very simple generic model of Islamic microfinance based on Mudarabha. In this case, this cash is provided by Islamic microfinance provider to the recipient. So, this aspect, this leg of Islamic microfinance is similar to the conventional microfinance, which is actually cash oriented. Now, this guy uses this money, 50,000, buys some merchandise, does business, does trading of the merchandise and generates an income revenue of 120,000 per month. Now, if the profit distribution ratio is 50-50, then 35,000 should go to Islamic microfinance provider and 35,000 should be kept by the recipient. This is a simple example. In actual practice, we don't have that kind of exaggerated figure, but I am just trying to highlight the concept. In actual practice of Mudarabha based Islamic microfinance, a bulk of the money, a bulk of the profit is actually kept by the microfinance recipient. In other words, the Mudarabha and Rabbulmal, Rabbulmal happen to be Islamic microfinance provider. They agree on a profit distribution ratio, which is in favor of the recipient of microfinance. It could be 90% going to the recipient and 10% going to the Islamic microfinance provider or something like this one. So, in this case, 50,000 is provided as Mudarabha capital to the recipient who uses this money to do some business and generates an income of 100,000. Out of 100,000, 50,000 is the cost. The remaining 50,000 profit is distributed between the microfinance provider, which receives 5,000 and the recipient receives 45,000. If this continues like this one on a monthly basis, assuming that the microfinance provider keeps on receiving 5,000 on a monthly basis from the microfinance recipient, in 12 months, the Islamic microfinance provider would have received 60,000. So, 60,000 is enough for the Islamic microfinance provider to get his money back, the 50,000 which he extended to the microfinance recipient plus a return. If that happens, at that point in time, the Islamic microfinance provider would wind up the Mudarabha. And this would be a very special kind of winding up because the Islamic microfinance provider would say, you keep the 50,000 cash we provided to you as Mudarabha capital. We are happy with 60,000 which has come back to us in the form of our share in the Mudarabha profit. So, from this viewpoint, we can see that Mudarabha arrangement is quite compassionate. If it was exploitative, then Islamic microfinance provider should have asked the recipient to return 50,000 initial Mudarabha capital as well. However, because the objective is to help the targeted person, the Islamic microfinance provider based on Mudarabha would be happy if their profit in the share is such that they retrieve their initial investment and earn some profit as well.