MUDARABAH
"Mudarabah" is a special kind of partnership where one partner gives money to
another for investing it in a commercial enterprise. The investment comes from
the first partner who is called 'rabb-ul-mal’, while the management and work is
an exclusive responsibility of the other, who is called ‘mudarib’.
Business of the Mudarabah
The rabb-ul-mal may specify a particular business @r the mudarib, in which
case he shall invest the money in that particular business only.
This is called al-mudarabah al-muqayyadah (restricted mudarabah). But if he
has left it open for the mudarib to undertake whatever business he wishes, the
mudarib shall be authorized to invest the money in any business he deems fit.
This type of mudarabah is called .al-mudarabah al-mutlaqah" (unrestricted
mudarabah)
Distribution of the profit
It is necessary for the validity of mudarabah that the parties agree, right
at the beginning, on a definite proportion of the actual profit to which each
one of them is entitled. No particular proportion has been prescribed by the
Shari'ah; rather, it has been left to their mutual consent. They can share the
profit in equal proportions, and they can also allocate different proportions
for -the rubb-ul-mal and the mudarib. However, they cannot allocate a lump sum
amount of profit for any party, nor can they determine the share of any party at
a specific rate tied up with the capital. For example, if the capital is Rs.
IOOOOO/- they cannot agree on a condition that Rs. 10000/- out of the profit
shall be the share of the mudarib, nor can they say that 20% of the capital
shall be given to rabb-ul-mal. However, they can agree on that 40% of the actual
profit shall go to the mudarib and 60% to the rabb-ul-mal or vice versa.
If the business has incurred loss in some transactions and has gained profit in
some others, the profit shall be used to offset the loss at the first instance,
then the remainer, if any, shall be distributed between the parties according to
the agreed ratio.
Termination of Mudarabah
The contract of mudarabah can be terminated at any time by either of the two
parties. The only condition is to give a notice to the other party. If all the
assets of the mudarabah are in cash form at the time of termination, and some
profit has been earned on the principal amount, it shall be distributed between
the parties according to the agreed ratio. However, if the assets of the
mudarabah are not in the cash form, the mudarib shall be given an opportunity to
sell and liquidate them, so that the actual profit may be determined.
There is a difference of opinion among the Muslim jurists about the question
whether the contract of mudarabah can be effected for a specified period after
which it terminates automatically. The Hanafi and. Hanbali schools are of the
view that the mudarabah can be restricted to a particular term, like one year,
six months, etc, after which it will come to an end without a notice. On the
contrary, Shafi'i and Maliki schools are of the opinion that the mudarabah
cannot be restricted to a particular time. 2
However, this difference of opinion relates only to the maximum time-limit of
the mudarabah. Can a minimum time-limit also be fixed by the parties before
which mudarabah cannot be terminated? No express answer to this question is
found in the books of Islamic Fiqh, but it appears from the general principles
enumerated therein that no such limit can be fixed, and each party is at liberty
to terminate the contract whenever he wishes.
This unlimited power of the parties to terminate the mudarabah at their pleasure
may create some difficulties in the context of the present circumstances,
because most of the commercial enterprises today need time to bring fruits. They
also demand constant and complex efforts. Therefore, it may be disastrous to the
project, if the rabb-ul-mal terminates the mudarabah right in the beginning of
the enterprise. Specially, it may bring a severe set-back to the mudarib who
will earn nothing despite all his efforts. Therefore, if the parties agree,
when entering into the mudarabah, that no party shall terminate it during a
specified period, except in specified circumstances, it does not seem to
violate any principle of Shari'ah, particularly in the light of the famous
hadith, already quoted, which says:
All the conditions agreed upon by the Muslims are upheld, except a condition
which allows what is prohibited or prohibits what is lawful.
"An Introduction to Islamic Finance"
Muhammad Taqi Usmani
Related Reading:
|
