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MUDHARABAH

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MUDHARABAH Powered By Docstoc
					MAHYUDDIN KHALID      emkay@salam.uitm.edu.my
                              CONTENT
                 DEFINITION
 DEFINITION
                 EVIDENCE
  EVIDENCES      PILLARS OF MUDHARABAH
                 CATEGORIES OF MUDHARABAH
    PILLARS
                 CONDITION OF MUDHARABAH
        TYPES
                 DIFFERENCES BETWEEN MUDHARABAH &
                  MUSHARAKAH
 OPINION OF
  SCHOLARS


APPLICATION




    2
                                     DEFINITION
                 Literally:
 DEFINITION
                    Derived from the phrase “dharaba fi al-ard” which
                     means to make a journey and it is called this because the
  EVIDENCES
                     agent (entrepreneur) gets profit by virtue of his hard
                     work and efforts in performing long journeys.
    PILLARS
                 Technically:
        TYPES
                    A contract or a partnership where one provides the
                     capital and the other the entrepreneurship with the
 OPINION OF          profit being shared among them with a predetermined
  SCHOLARS           condition
                    Partnership in profit whereby one party (rabb al-mal)
APPLICATION
                     provides capital and the other party (mudharib)
                     provides labor.


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                         NATURE OF MUDHARABAH
                 The term Mudharabah was widely known in the
 DEFINITION
                  classical literature as Qiradh and muqharadhah.
  EVIDENCES
                 Both terms derived from the word qarada which
                  means to cut off (al-qat’). This is simply because the
    PILLARS       capital provider (rabb al-mal) need to cuts off some
                  of his money to be utilized by the mudharib in
        TYPES     business activities.
                 Imam Nawawi says: A joint-stock company is
 OPINION OF
  SCHOLARS        called Qiradh or Mudharabah
                 It exists between two persons, one of whom
APPLICATION
                  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 MUDHARABAH
                1. The profit will be shared between the two parties
 DEFINITION
                   according to the terms of their agreement
  EVIDENCES
                2. The losses will be borne by the capital provider
                   alone who is the financier.
    PILLARS     3. The entrepreneur only suffers the frustration of a
                   fruitless effort.
        TYPES


 OPINION OF
  SCHOLARS


APPLICATION




    5
                                       EVIDENCE
                 Al-Quran:
 DEFINITION



  EVIDENCES



    PILLARS



        TYPES


 OPINION OF
  SCHOLARS


APPLICATION
                   Although this verses do not directly address the legality of
                    mudharabah, they have been interpreted to include those
                    who travel for the purpose of trading and seeking permissible
                    income.

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

 OPINION OF
  SCHOLARS


APPLICATION




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                          PILLARS OF MUDHARABAH
                1. Sahibul Mal
 DEFINITION
                   Owner of capital, fund provider
                2. Mudharib
  EVIDENCES
                   Entrepreneur
    PILLARS
                3. Ra’sul Mal
                   Capital
        TYPES   4. Al-Amal or Mashru’
                   Business Venture or projects
 OPINION OF
  SCHOLARS
                5. Ribh
                   Predetermined share of profit
APPLICATION     6. Sighah
                   Ijab (Offer)
                   Qabul (Acceptance)

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                              FLOWS OF MUDHARABAH

 DEFINITION                                 profit


                                                          profit
  EVIDENCES
                Sahibul Mal                Mudharib
                                Ijab &
                 (Owner of
                  Capital)
                                Qabul    (Entrepreneur)
    PILLARS



        TYPES

                                                                        Ribh
 OPINION OF      Ra’sul-Mal
  SCHOLARS                                  Mashru’                (Predetermined
                 (Capital)
                                            (Project)                profit rate)

APPLICATION




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                 ROLES OF ENTREPRENEUR (MUDHARIB)
                     Ameen      • The money given by Rab al-mal (investor) and the
 DEFINITION
                                  assets required therewith are held by him as a trust.
                    (Trustee)
  EVIDENCES
                     Wakeel     • In purchasing goods for trade, he is an agent of Rab
                                  al-mal.
    PILLARS
                    (Agent)
                     Sharik     • In case the enterprise earns a profit, he is a partner
         TYPES
                                  of Rab al-mal who shares the profit in agreed ratio.
                    (Partner)
 OPINION OF
  SCHOLARS          Dhamin      • If the enterprise suffers a loss due to his negligence
                                  or misconduct, he is liable to compensate the loss.
APPLICATION
                    (Liable)
                      Ajeer     • If the Mudarabah becomes Void due to any reason,
                                  the Mudarib is entitled to get a fee for his services.
                   (Employee)
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                 CATEGORIES OF MUDHARABAH

 DEFINITION                     Mudharabah


  EVIDENCES


                    Mudharabah               Mudharabah
    PILLARS
                     Mutlaqah                Muqayyadah

         TYPES


 OPINION OF          Unlimited                Limited
  SCHOLARS          Mudharabah               Mudharabah

APPLICATION

                        Profit sharing           Profit sharing
                     contract unrestricted     contract restricted
                       by a stipulation          by stipulation

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                           MUDHARABAH MUTLAQAH
                  The entrepreneur (mudharib) may buy and/or sell all
 DEFINITION        types of merchandise as he sees fit, hire helpers as
                   needed, rent equipment and travel with the equipment
  EVIDENCES        etc.
                  The business is run according to entrepreneur
    PILLARS        (mudharib) expertise and experience based on his
                   discretion
         TYPES
                  The capital provider (rabb al-mal) authorizes the
                   entrepreneur (mudharib) to act completely at the latter’s
 OPINION OF        discretion in all business matter.
  SCHOLARS
                  Mudharib’s liberty to transact the capital:
                     All matters which are commonly practiced in business - the
APPLICATION
                      authorization to transact with the capital is unlimited
                     All matters which are not commonly practiced in business -
                      free to transact with the capital provided with permission
                      from rabb al-mal. Eg: giving the capital as donations or loans
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                        MUDHARABAH MUQAYYADAH
                  The capital provider (rabb al-mal) makes certain
 DEFINITION
                   limitations to the activities to be conducted by the
                   entrepreneur (mudharib) with regards to the
  EVIDENCES
                   capital given
    PILLARS       The business is subject to capital provider’s (rabb al-
                   mal) instruction in term of type, location, time etc.
         TYPES    Mudharib’s liberty to transact the capital:
                     The mudarib is subjected to certain limitations in the
 OPINION OF
  SCHOLARS            form of territorial limits, or time limitation and
                      limitation in terms of kind of goods or person with
APPLICATION           whom trade may be conducted



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


APPLICATION




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                       CONDITION OF MUDHARABAH
                  Conditions of Capital
 DEFINITION
                   1. Must be in the form of money and not commodities
                      since commodities fluctuate in price and cause
  EVIDENCES
                      uncertainty and ignorance
                   2. The capital must be clearly specified, determined and
    PILLARS
                      known at the time of the contract
                   3. Must be available cash-present during the conclusion
         TYPES
                      of contract
 OPINION OF        4. Must be delivered to the possession of the mudharib
  SCHOLARS            entirely
APPLICATION




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                       CONDITION OF MUDHARABAH
                  Conditions Of Profit
 DEFINITION
                   1. The distribution of profit must be determined
                      proportionally between the capital provider and the
  EVIDENCES
                      entrepreneur
                   2. The pre-determined profit must be in ratio form or
    PILLARS
                      percentage and not in fixed amount
                   3. Allowed to be different ratios at different situations
         TYPES


 OPINION OF
  SCHOLARS


APPLICATION




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                                  ISSUES IN PROFIT
                  There cannot be a distribution of profits until the losses
 DEFINITION        have been written off and the equity of rab al-mal has
                   been fully restored
  EVIDENCES
                  Any distribution of profits before the conclusion of the
                   contract will be considered as an advance
                  All losses incurred in the ordinary course of business
    PILLARS        must be charged against profits before they can be
                   charged against the equity of rab al-mal
         TYPES    If it has been agreed that the entire profit will be taken
                   by the rab al-mal – the mudarib will be entitled to the
 OPINION OF        customary remuneration (‘ujr al-mithly)
  SCHOLARS        If it has been agreed that the entire profit will be taken
                   by the mudarib – the rab al-mal is a creditor and
APPLICATION        mudarib is a debtor
                  The mudarib cannot claim any periodical salary /fee or
                   remuneration for the work done by him for the
                   mudharabah
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                 TERMINATION OF MUDHARABAH CONTRACT

                  Unilateral termination
 DEFINITION
                  On the date of maturity if the two parties had earlier
  EVIDENCES
                   agreed to set the time limit
                  When the fund of mudharabah has been exhausted
    PILLARS        or have suffered losses
                  The death of the mudharib or liquidation of
         TYPES
                   institution that acts as mudharib
 OPINION OF       Insanity of any parties to the mudharabah contract
  SCHOLARS


APPLICATION




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                  DIFFERENCE BETWEEN MUDHARABAH AND MUSHARAKAH

                 MUDHARABAH                                MUSHARAKAH
 DEFINITION
                 The capital is financed by one party,     The capital is financed by all the
                 which is the capital provider or the      shareholders according to the
  EVIDENCES
                 owner of the business                     proportion agreed upon by all parties

                 The capital must be in the form of cash   Any type of property that could
    PILLARS      money                                     normally be assessed and have certain
                                                           commercial value could be considered
                                                           as an acceptable source of capital.
         TYPES                                             Example; intellectual capital
                 The entrepreneur will be the only one     All the shareholders have the right to
 OPINION OF      that will conduct the actual business.    work and contribute their skills,
  SCHOLARS
                 The capital provider is not allowed to    knowledge, experience e and expertise
                 jointly work with the entrepreneur.       in the company
APPLICATION
                 The monetary loss will be solely borne    The monetary loss will be jointly borne
                 by the capital provider while the         by all the shareholders according to the
                 entrepreneur will only suffer from a      ratio and proportion of their respective
                 fruitless effort without having to bear   share in the partnership
                 all the capital losses
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                           MODERN APPLICATION
                  Project financing
 DEFINITION
                  Import/export financing
  EVIDENCES       Working capital financing
                  Saving/Current/Investment account
    PILLARS
                  Interbank lending/borrowing
         TYPES
                  Sukuk

 OPINION OF
  SCHOLARS


APPLICATION




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                 END OF CHAPTER

 DEFINITION



  EVIDENCES



    PILLARS



         TYPES        
 OPINION OF
  SCHOLARS


APPLICATION




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