---
title: "What is Profit sharing ratio? | IslamicOpenFinance™"
description: "The agreed split of profit between partners, expressed as a ratio of actual profit, never as a fixed sum or a share of capital."
url: https://islamicopenfinance.com/glossary/profit-sharing-ratio/
lang: en-GB
source: "IslamicOpenFinance"
---

[Glossary](https://islamicopenfinance.com/glossary/) / [Partnership and investment](https://islamicopenfinance.com/glossary/#partnership)

Partnership and investment

# Profit sharing ratio

The agreed split of profit between partners, expressed as a ratio of actual profit, never as a fixed sum or a share of capital.

The profit sharing ratio is the proportion in which profit is divided between the parties to a mudarabah or musharakah. Bank Negara Malaysia defines it as the ratio in which profits are shared between the rabb al-mal and the mudarib. It must be agreed at the outset and expressed as a share of actual profit, since a fixed sum or a percentage of capital would guarantee a return and defeat the partnership.

## Sources

- [Bank Negara Malaysia, Mudarabah policy document, 2015: Glossary, Profit sharing ratio](https://www.bnm.gov.my/documents/20124/938039/Mudarabah.pdf)

This entry explains a term; it is not a Shariah ruling. Approving a product is for each institution's own Shariah board and regulator.

## Related terms

[**Mudarabah** A partnership of capital and work: profit is shared by an agreed ratio, while financial loss falls on the capital provider.](https://islamicopenfinance.com/glossary/mudarabah/) [**Musharakah** A partnership in which each partner contributes capital; profit is shared as agreed and loss in proportion to capital.](https://islamicopenfinance.com/glossary/musharakah/) [**Profit allocation (investment accounts)** The method for dividing a pool's income between the bank and investment account holders, including reserves and weightages.](https://islamicopenfinance.com/glossary/profit-allocation/) [**Rabb al-mal** The capital provider in a mudarabah, who funds the venture, shares profit by the agreed ratio and bears financial loss.](https://islamicopenfinance.com/glossary/rabb-al-mal/)

**Partnership and investment**

1. [Mudarabah](https://islamicopenfinance.com/glossary/mudarabah/)
2. [Musharakah](https://islamicopenfinance.com/glossary/musharakah/)
3. [Diminishing musharakah](https://islamicopenfinance.com/glossary/diminishing-musharakah/)
4. [Rabb al-mal](https://islamicopenfinance.com/glossary/rabb-al-mal/)
5. [Mudarib](https://islamicopenfinance.com/glossary/mudarib/)
6. [Restricted mudarabah](https://islamicopenfinance.com/glossary/restricted-mudarabah/)
7. [Unrestricted mudarabah](https://islamicopenfinance.com/glossary/unrestricted-mudarabah/)
8. [Wakalah bil-istithmar (investment agency)](https://islamicopenfinance.com/glossary/wakalah-bil-istithmar/)

[All 221 terms](https://islamicopenfinance.com/glossary/)