Wakala establishes agency relationships: the principal instructs the agent to perform specific actions—purchase assets, deploy funds, conduct a transaction—and the agent receives agreed compensation in return.
The agent's fee is payment for a service and therefore not considered riba: it is tied not to the provision of funds but to the performance of work. The amount is typically fixed or determined as a percentage of the transaction value.
The structure often serves as an element in more complex transactions. In murabaha, an organization may act as the client's agent in purchasing goods; in sukuk issuance, an agent manages an asset portfolio in the interests of holders; in asset management, wakala serves as an alternative to mudaraba.
The distinction from mudaraba is significant for investors: an agent receives a fixed fee regardless of the outcome, whereas a mudaraba manager shares in profits. Accordingly, incentives are distributed differently, and this should be considered when selecting a product.