In Mudarabah financing, capital risk is borne by the capital provider while management is provided by the entrepreneur, with profits divided by pre-agreed ratios.
What is Mudarabah?
Mudarabah is a form of a business contract whereby one person brings the capital and another person the manpower (effort). The bank offers the capital and the entrepreneur is considered as a Mudarib (managing trustee).
Profit & Loss Sharing Rules
All the profit & loss is shared by both parties; through an agreement a percentage is stated for profit distribution. In case of commercial loss not caused by negligence, the capital loss is borne by the capital provider, while the entrepreneur loses their time and effort.
Banks in Somaliland typically get an annual profit rate of 9% to 12% for Mudarabah commercial financing portfolios.
Core Features
- Fosters Entrepreneurship: Enables talented business founders and SMEs without sufficient capital to access institutional backing.
- Aligned Interests: Both the financier and the business operator share a direct stake in commercial success.
- Strict Ethical Standards: Capital must be deployed exclusively in ethical, Sharia-permissible enterprises.
Official 4-Step Consumer Dispute Resolution Protocol
If your financial transaction, fee deduction, or mobile banking request has not been satisfactorily addressed by your bank:
- Step 1: Direct Branch Inquiry — Lodge an official written inquiry with your commercial bank's branch manager and retain your ticket reference number.
- Step 2: Internal Bank Ombudsman — If unresolved within 5 business days, escalate to the accredited bank's Chief Compliance Officer or Customer Care Desk.
- Step 3: SLBA Consumer Secretariat — Submit a formal mediation petition via the SLBA Consumer Dispute portal (somalilandbanking.org/contact) with relevant transaction receipts.
- Step 4: Central Bank Regulatory Oversight — Final statutory arbitration through the Central Bank of Somaliland Supervision & Financial Integrity Division.