Growing popularity of modaraba as Islamic mode of financing

A Mudarabah is a joint venture between a financier and manager (Mudarib) of a venture. It is a financial instrument containing no interest. The mudarib and financier share profit according to an agreed ratio, while the financier alone bears the risk. The financier cannot interfere in the management of the mudaraba but can provide broad policy guidelines. In Pakistan, mudaraba sponsors must be registered under the mudaraba Companies and mudaraba Ordinance (1980) and must conform to the standards the law outlines. To ensure the sound progress of mudarabas and to protect mudaraba certificate holders adequately, regulatory authorities must supervise the affairs of mudarabas strictly.