Mudarabah is a profit-sharing partnership between two parties: the rab al-mal (capital provider) who contributes money, and the mudarib (manager) who contributes expertise, time, and effort. Profits are shared by agreement, but losses fall entirely on the capital provider.
Why does the capital provider bear all losses? Because the mudarib has already lost their time and effort — that is their risk. If the venture fails, the investor loses money and the manager loses labor. Islamic scholars consider this a fair distribution of risk.
Mudarabah is the foundation of Islamic savings and investment accounts. When you deposit money in an Islamic bank's savings account, the bank acts as mudarib (investing your money), and you are the rab al-mal. Profits are shared; your deposit is guaranteed only in current accounts.