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MAHYUDDIN KHALID [email protected] FIQH MUAMALAH ISLAMIC BUSINESS TRANSACTION CHAPTER FIFTEEN MUDHARABAH

ISB540 - MUDHARABAH

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ISLAMIC BUSINESS TRANSACTION

CHAPTER FIFTEEN MUDHARABAH

MAHYUDDIN KHALID

[email protected]

CONTENTDEFINITION

EVIDENCE

CATEGORIES

DEFINITION EVIDENCE PILLARS OF MUDHARABAH CATEGORIES OF MUDHARABAH CONDITION OF MUDHARABAH DIFFERENCES BETWEEN MUDHARABAH & MUSHARAKAH

CONDITIONS

COMPARISON

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DEFINITIONDEFINITION

EVIDENCE

CATEGORIES

CONDITIONS

Literally: Increase or profit Technically: Mudharabah is a contract or a partnership where one provides the capital and the other the entrepreneurship with the profit being shared among them with a predetermined condition

COMPARISON

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NATURE OF MUDHARABAHDEFINITION

EVIDENCE

CATEGORIES

CONDITIONS

COMPARISON

The term mudharabah is derived from the expression making or performing a journey (Ad-dharb fil ardh) and it is called this because the agent (entrepreneur) gets profit by virtue of his hard work and efforts in performing long journeys. The term Mudharabah was widely known in the classical literature as Qiradh. Imam Nawawi says: A joint-stock company is called Qiradh or Mudharabah It exists between two persons, one of whom supplies fund to the other to trade with, on condition that the former has a share in the profit.

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CHARACTERISTIC OF MUDHARABAH1.DEFINITION

2.EVIDENCE

3.CATEGORIES

The profit will be shared between the two parties according to the terms of their agreement The losses will be borne by the capital provider alone who is the financier. The entrepreneur only suffers the frustration of a fruitless effort.

CONDITIONS

COMPARISON

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EVIDENCE Al-Quran:DEFINITION

EVIDENCE

CATEGORIES

CONDITIONS

COMPARISON

These general verses indicate the legality of working and venturing on property using Mudharabah.

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EVIDENCEDEFINITION

EVIDENCE

CATEGORIES

Hadith: Reported By Hakim Bin Hizam that he had stipulated to a man that if he gave him certain asset to be utilized for Muqaradah (Mudharabah, Qiradh) , he must not use it to purchase livestock, or carries it (travel) through the sea, or drop by at the oasis, if the man committed any of the above, he is considered to be the guarantor of my property

CONDITIONS

COMPARISON

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PILLARS OF MUDHARABAH1.DEFINITION

2.EVIDENCE

3.CATEGORIES

4.CONDITIONS

5.COMPARISON

6.

Sahibul Mal Owner of capital, fund provider Mudharib Entrepreneur Rasul Mal Capital Al-Amal or Mashru Business Venture or projects Ribh Predetermined share of profit Sighah Ijab (Offer) Qabul (Acceptance)

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FLOWS OF MUDHARABAHDEFINITION profit profit Sahibul Mal(Owner of Capital)Ijab & Qabul

EVIDENCE

Mudharib (Entrepreneur)

CATEGORIES

CONDITIONSRasul-Mal Ribh Mashru

COMPARISON

(Capital)

(Project)

(Predetermined profit rate)

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CATEGORIES OF MUDHARABAHDEFINITION 1. Mudharabah Mutlaqah Unlimited Mudharabah The capital provider authorizes the entrepreneur to act completely at the latters discretion in all business matter The entrepreneur may buy and/or sell all types of merchandise as he sees fit, hire helpers as needed, rent equipment and travel with the equipment etc. 2. Mudharabah Muqayyadah Limited Mudharabah The capital provider makes certain limitations to the activities to be conducted by the mudharib with regards to the capital given The limit may be in the form of territorial limits, or time limitation Also limitation in terms of kind of goods or person with whom trade may be conducted10

EVIDENCE

CATEGORIES

CONDITIONS

COMPARISON

CONDITION OF MUDHARABAHDEFINITION

EVIDENCE

CATEGORIES

CONDITIONS

Conditions of Work 1. The work or business venture under Mudharabah must be conducted solely by the entrepreneur (mudharib). It is not legal if the capital provider (rabbulmal) was also required to conduct the daily operation. 2. The project must be legal and permissible(halal) 3. All the expenses will be taken from the capital provided that is not more than the justified expenses required in the venture

COMPARISON

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CONDITION OF MUDHARABAHDEFINITION

EVIDENCE

CATEGORIES

Conditions of Capital 1. Must be in the form of money and not commodities since commodities fluctuate in price and cause uncertainty and ignorance 2. The capital must be clearly specified, determined and known at the time of the contract

CONDITIONS

COMPARISON

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CONDITION OF MUDHARABAHDEFINITION

EVIDENCE

Conditions Of Profit 1. The distribution of profit must be determined proportionally between the capital provider and the entrepreneur 2. The pre-determined profit must be in ratio form or percentage and not in fixed amount

CATEGORIES

CONDITIONS

COMPARISON

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DIFFERENCE BETWEEN MUDHARABAH AND MUSHARAKAHMUDHARABAHDEFINITION

MUSHARAKAH The capital is financed by all the shareholders according to the proportion agreed upon by all parties Any type of property that could normally be assessed and have certain commercial value could be considered as an acceptable source of capital. Example; intellectual capital All the shareholders have the right to work and contribute their skills, knowledge, experienc e and expertise in the company The monetary loss will be jointly borne by all the shareholders according to the ratio and proportion of their respective share in the partnership

EVIDENCE

The capital is financed by one party, which is the capital provider or the owner of the business The capital must be in the form of cash money

CATEGORIES

CONDITIONS

COMPARISON

The entrepreneur will be the only one that will conduct the actual business. The capital provider is not allowed to jointly work with the entrepreneur. The monetary loss will be solely borne by the capital provider while the entrepreneur will only suffer from a fruitless effort without having to bear all the capital losses

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END OF CHAPTERDEFINITION

EVIDENCE

CATEGORIES

CONDITIONS

COMPARISON

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