• This Practice Note provides a high-level overview of the different structures of a Mudaraba.

• Rab ul mal : the person or party that invests the capital under the Mudaraba.

• Mudarib : the person or party acting as the entrepreneur or agent under the Mudaraba.

Mudaraba, as a form of investment by Islamic banks, is not widely practised in Kuwait by Islamic banks as this structure, by its very nature, is unsecured thereby increasing the risk on capital return for Islamic banks. In addition, mudaraba provides for the capital provider's sole liability for mudaraba losses. Therefore, Islamic banks in Kuwait, for the purpose of providing investment capital to its customers, prefer alternative structures such as Ijarah (see PN:”Structure of an Ijarah transaction”-Kuwait), Murabaha (see PN:"Structure of a Murabaha transaction”-Kuwait), Musharaka (see PN:“Structure of a Musharaka transaction”-Kuwait) and Wakala (see PN:“Wakala”-Kuwait) as they are more suitable where funds are being made available to the bank's customers.