Mudaraba in Islam – Understanding the types and conditions of Mudaraba
Mudaraba in Islam: The capitalist economy is making people’s lives arduous. Because in the capitalist economy, only the rich get richer and the poor get poorer.
But in contrast, the Islamic economy is very effective where the money of the poor is too little for the rich to enjoy.
For this reason, the popularity of the Islamic economy is constantly increasing. And Mudaraba is a form of Islamic economy.
This article discusses Mudaraba in Islam and everything related to it. Hopefully, this will significantly benefit all readers interested in learning about Mudaraba.
Mudaraba in Islam meaning in English
Definition of Mudaraba in Islam: Mudaraba is the agreement between two or more persons on dividends at a fixed rate.
Where one side will provide capital and the other side will provide labor.
The definition of Mudaraba in Al-Mujamul Wasit is as follows:
(Al-Mudharabah) (in shari’ah) Company contract in the interest of the man from the man and the action from the other.
Mudaraba in Islam, in the eyes of the Shari’ah, is a partnership agreement in which one person’s wealth and the other’s labor are divided into dividends. (Al-Muzammul Wasit, Babu Ad-Dowad – 1/536)
Condition of Mudaraba in Islam
In Fuqaha, Keram Mudaraba in Islam mentions many conditions for its validity. Some of which relate to the discussion or application of the Mudaraba contract,
Some to the contractors, some to the capital, some to the business system, some to the profits, and so on. Each type of condition is discussed under a different heading.
Through this word or language, the proposal from one side and acceptance from the other will occur. As Rabbul Maal would say to Mudarib, I am giving you this money to do Mudarib’s business.
Then Mudarib will accept it. Or Mudarib will tell Rabbul Mal that you give me money to do Mudarabi business. Then Rabbul Maal will accept this offer.
Because one person may have many reasons to give money to another, it should be clear to them what is causing this financial transaction so there is no time left for later disputes.
Referring to the opinion of Fuqaha’i Keram in this regard, it is stated in Al-Mawsuatul Fiqhiyatul Quitiyyah:
“The Republic of the jurists is not bad in the debate from the word, it is the answer and the acceptance, and it is agreed upon in the context of the debate.”
‘Most jurists require language (application of words related to Mudaraba) for Mudaraba. And that is – proposal and acceptance.
In this way, Mudaraba will be effective even with words that carry the meaning of Mudaraba. ‘
Mudarabah contract in Islam
Both parties to the Mudaraba in Islam Agreement, namely Rabbul Maal and Mudarib, must have specific conditions for the Mudaraba Agreement to be valid.
Such as appointing a representative between the owner of the original property and Mudarib and having the qualifications to be a representative. Mudarib invests money in business under the direction of Rabbul Maal.
This means appointing Mudarib as a representative on behalf of Rabbul Maal. Rabbul Maal is like a Muakkil.
Types of Mudaraba
Second type: It will be lawful for Mudarib to do only those things on which the direction of Rabbul Maal is. This type does not include business practices that are not customarily considered business practices.
Nor does the Mudaraba Treaty naturally include him. For example, if Mudarib buys a product by spending extra money from the money given to Mudaraba by Rabbul Maal,
Then to pay the extra money, Rabbul Maal will not be bound by bail because Rabbul Maal is not allowed to spend this extra money.
In this way, if Mudarib is cheating while buying a product that other people do not normally eat, Rabbul Mal will not accept responsibility for it.
Because it is customary to cheat a small amount in business, but it is unusual to be cheated in excess.
Similarly, if Mudarib adds some of his own money or money received from someone else to Mudarib’s money, then Mudarib himself will be the guarantor of the funds.
The Lord will not bear his responsibility because Rabbul Maal is prohibited.
Importance of mudaraba
The third type is where Mudarib is only told to do business with conscience without giving direction. Then Mudarib Mudaraba can provide this money to others as Mudaraba.
You can do business with someone else and add your own money. But none of this would have been valid if j had not told you to do business with your conscience.
However, even in this tone, nothing is valid for him, which is not usually done by fair-minded people, such as cheating excessively, selling products at less than the market price, etc.
Type IV: Actions that are not fundamentally valid for Mudarib. With the unanimous consent of Fuqaha’i Keram, he will not be allowed to trade in haraam things like blood, dead animals, alcohol, and pigs.
The buying and selling of haram things and their profit are all haraam. Therefore, whether or not the Lord makes the goods conditional, buying, selling, and making a profit will not be valid. (Al-Mawsuatul Fiqhiyatul Quitiyyah-36 / 55-56)
Concept of Mudarabah
Three: The original treasure is in the hands of Mudarib as a deposit. It is like a lawyer.
Therefore, if Mudarib’s goods are damaged by accident without Mudarib’s mismanagement or negligence, then Mudarib will not be obliged to pay his compensation.
So if Rabbul Mal takes the condition that Mudarab’s goods are damaged, then Mudarib will have to pay his compensation, and the agreement will become void.
However, if Mudarib’s hand is behind the loss of goods, for example, if the goods are damaged due to negligence or any dishonest policy on the part of Rabbul Maal by violating the rules of trade, then he must pay compensation. (Al-Mawsuatul Fiqhiyatul Quitiyyah – 36 / 62-64)
Features of Mudaraba in Islam
Two: Rabbul Maal or Mudarib being more than one. With the unanimous consent of the Fuqaha’i Keram, one Rabbul Maal may appoint more than one Mudarib.
He will give Rasul goods to each Mudarib separately; they will do business individually.
In this way, there is a consensus among them that if a Rabbul Maal enters into a Mudaraba agreement with more than one Mudarib by the same Rasul Maal, it will also be valid.
As he said to three people with five lakh rupees, all three of you do Mudaraba business with this money. You will distribute half the profit equally, and I will take the other half.
Then the agreement will be valid, and the Mudaribars will get the right to trade jointly with Rasul Maal and distribute half the profit equally among them.
However, there is disagreement about whether more than one Rabbul Maal can appoint one Mudarib. The majority of jurists think that it is valid.
Another aspect of this type of Mudaraba is that both Mudariba and Rabbul Maal are more than one.
This Surat, too, can be presumed valid according to the majority of the ulama ‘. (Al-Mawsuat al-Fiqhiyat al-Quitiyyah – 36 / 64-65)
Mudaraba’s profit and loss account
However, the condition for the distribution of profits to be correct is that the Prophet should return the goods to the owner before the distribution.
Therefore, the distribution of profits is incorrect until the goods are handed over to the owner.
Even if one takes his share by distributing the profits before handing over the property to the owner of the Rasul Maal,
Then the Rasul Maal is lost in the hands of Mudarib. Then it is necessary to return the previously distributed profit and add it to the damaged Rasul Maal until Ra’sul’s goods are damaged.
Thus, if some part of Rasul Maal is lost or the amount of Rasul Maal is reduced due to loss of business, it must pay compensation from the profit.
If the profit remains after the compensation, it will be distributed between Mudarib and Rabbul Maal per the preconditions.
And if nothing is left, Mudarib will get nothing, and it will be thought that there was no benefit.
In other words, for the distribution of profits to be fully effective, the owner and Mudarib must agree to the first agreement.
Then if it is decided to transfer the capital to the owner, return it. And if it is agreed to do business again by renewing the contract, it will.
The distribution of profits will not be finalized before this calculation is completed. (Al-Mawsuat al-Fiqhiyat al-Quitiyyah – 36 / 69-65)
