The Arabic word sharekah means partnership or company and denotes mixing of two shares in a way as to make them indistinguishable.

In Islamic jurisprudence, there are several definitions of partnership

Hanafi scholars define partnership as “a contract between partners on both capital and profit.”

Shafe’i scholars define partnership as “a contract giving the right in something to two or more people, making it common.”

Hanbali scholars define partnership as “the coming together of two or more people in disposal or acting.”

Two main kinds of partnerships

Partnerships are primarily of two kinds: partnerships of ownership and partnerships of contracts.

Partnerships of Ownership (Amlaak)

A partnership of ownership means that two or more people share the ownership of a single property, either by their own choice (i.e., by agreeing to buy the property) or without their own choice (i.e., inherting the property, for example). Each of the parties is a partner and none of the parties can dispose of the object on his or her own, without the permission of all other partners.

Partnership of Contracts (Uqood)

A partnership of contacts is between two or more people to have partnership in capital and profit. Such partnerships are subdvided into four kinds:

  1. Amwal - financial company, where two partners contribute finances to start the company. This type further includes Al-’Inan or unequal share partnership and Al-Mufawadah or equal share partnership;
  2. Wojuh - eminence, where a partner only contributes his or her eminence to the partnership (e.g., Al-Azhar University giving accreditation to an institute in Canada is a partnership where Al-Azhar is exhanging its eminence for a consideration);
  3. Sana’i - workmanship, where the partners contribute labour to the partnership;
  4. Mudarabah - capital-labour partnership, where one partner contributes labour and the other partner contributes capital.

It is the Mudarabah partnership that has become the focus of Islamic economics and finance in the modern era. We will generally not go into more details on all the various kinds of partnerships.

Source: Kharofa, 166-171.