There are at least 2 public contracts that are present in the profit-seeking process. In the previous article, it was discussed about the murabaha contract . This time, the next contract will be discussed, the mudharabah agreement .
What is mudharabah ?
Mudharabah comes from the word dharb , meaning to hit or walk. Understanding hitting or walking is more precisely the process of someone hitting his feet in running a business.
In the practical context, mudharabah is a business cooperation agreement between two parties, namely the party managing the business / business owner referred to as mudharib and the party who has capital called shahibul maal. In the contract the important point is located at the beginning of the agreement on the profit sharing ratio.
The video discusses the mudharabah agreement and its simple example
When mudharib and shahibul maal meet they will make a mudaraba agreement . Shahibul Maal will provide capital investment to the business of the mudarib which then the mudharib will use the capital to manage his business.
On the day when mudharib has returned the capital and made a profit he will return the capital gain from the shahibul maal plus the profits distributed according to the ratio of the proceeds of the proceeds of the contract.
Also Read: Understanding Murabahah in Islamic Economy
The concept of mudharabah contract contained in Fatwa DSN MUI No: 07 / DSN-MUI / IV / 2000 concerning mudharabah (qiradh) financing. In the context of the fatwa is mudharabah implemented by Islamic Financial Institutions.
Foundations of the Qur’an and Hadith
The determination of the ruling is based on several passages from the Qur’an and the Hadith. In QS Al-Maidah : 1 which means, “O believers! Fulfill those promises. Animals are allowed for you, except for those that will be read to you. It is not legal to hunt while you are performing a pilgrimage. Verily Allah decrees the laws as He pleases. ”
The verse emphasizes the importance of contract / agreement especially for people who have faith in themselves. Then in QS Al-Baqarah 275 and 278 emphasized the prohibition against usury.
Surah Al-Baqarah: 275, ” And God permitted trade and forbidden usury ” later in Surah Al-Baqarah: 278: ” O ye – who believe! Fear Allah and leave the waste if you are believers. ” The verse describes the solution to the prohibition on usury is the sale and purchase.
Moreover, the Prophet said, ” Muslims are bound by the conditions they make except the conditions that prohibit halal or legalize the illegal ” (HR. Muslim, Tirmizi, Nasa’i, Abu Daud and Ibn Majah).
The verse describes the solution to the prohibition on usury is the sale and purchase. Moreover, the Prophet said, ” Muslims are bound by the conditions they make except the conditions that prohibit halal or legalize the illegal ” (HR. Muslim, Tirmizi, Nasa’i, Abu Daud and Ibn Majah).
Kaidah Fiqh and Ijma Scholars
Then it is based on the rule of fiqh that all forms of religion are basically possible unless there is a prohibition proposition. From these arguments as well as the rules of fiqh, then the form of ijma which Wahbah Zuhaili explains , “Concerning Ijma, it is reported that some companions give up orphans as mudharabah, and no one denies it.
Therefore, it is ijma “. Thus the scholars argue in connection with the mudharabah which is taken from the head of the nabawiyah of Ibn Hisyam’s work, that the Prophet went on to do business as mudharib to Sham with the wealth of Khadijah bint Khuwailid before becoming a prophet; after becoming a prophet, he described the business as strictly “.
This shows that the practice of mudharabah was practiced when the Messenger of Allah (may peace be upon him) became a merchant. The practice was performed by the Messenger of Allah (may peace be upon him) which was then known as mudharib and Khadijah as shahibul maal.
Pillars and Mudharabah Terms
Basically, the agreement is free from the rules and conditions that apply. This is necessary so that the covenant being executed is not fasid (broken) and the efficacy of the contract is not lost. Then, what are the rules and conditions of mudharabah ?
Shahibul maal and mudharib should understand the law.
That’s why this contract can only be done for those who have reached puberty and had no knowledge regarding the law. Because if neither party nor the parties speak to the law then it is feared that the act will not be in accordance with the rules.
Hours (ijab Kabul)
Sighat (consent granted) also needs to be done so that there is clarity of the contract that is done. As for the matter of sighat there are things that must be considered including:
- Bidding and acceptance must explicitly indicate the purpose of the contract.
- Bidding and acceptance are made at the time of the contract.
- The contract is written down, through correspondence or using modern methods of communication.
In relation to capital, it must be a sum of money or assets given by the shahibul maal to mudharib for the purpose of business provided:
- The number and type must be known.
- Can be in the form of money or valuables. If in the form of assets, they must be assessed at the time of the contract.
- It is not a form of debt and must be paid to mudharib,either gradually or indirectly, in accordance with the agreement.
Mudharabah profit is the amount obtained as excess of capital, with conditions that must be met:
- Must be for both parties and should not be for one party.
- The proportionate profit share for each party must be known and stated at the time the contract is agreed upon and must be in the form of a percentage (ratio) of profits according to the agreement. Change in ratio must be based on agreement.
- Shahibul Maalincurs all damages as a result of mudharabah, and the manager shall not be liable for any damages except as a result of willful misconduct, negligence, or breach of contract.
Business Activities by Mudharib
The business activities of mudharib , in view of the capital provided by shahibul maa l should primarily take into account:
- mudharibhas the exclusive right to carry on its business without the intervention of shahibul maal , but it has the right to supervise it.
- Shahibul Maalshould not limit the actions of managers in such a way as to hinder the attainment of mudharabah, which is profit.
- Mudharibshould not violate Islamic sharia law in his actions related to mudharabah, and must adhere to the customary practices of the activity
Types of Mudharabah Agreements
Mudharabah Akad has different characteristics depending on the type. generally there are two types of mudharabah contracts including:
The Mudharabah contract has the characteristics of the owner of the funds / capital ( shahibul maal ) having the authority to do anything or intervene in the current business to be successful and in accordance with the agreed business goals between the two parties.
So suppose you have a fish farming business, then you do a mudaraba agreement with an investor. Well, the investor has the right to intervene in your business so that he can change the system in your business such as how to sell, recruitment HR, financial management and so on.
But you still have the right to manage your business. Even so what you will do needs to be discussed with your investor.
Another case with mudharabah muqayyadah where shahibul maal has the right to business intervention, in mudharabah mutlaqah, the shahibul maal does not have the right to regulate the business of the entrepreneur.
So when there is a mudharabah agreement between shahibul maal and mudharib (entrepreneur) then the authority to organize 100% business is the right of the entrepreneur. The owner of the capital does not have the right to direct the business to which he provides the capital.
Mudharabah Scheme on Banking Transactions
Here is a picture related to the mudharabah scheme in practice in banking:
The scheme of mudhrabah in banking
Seen in the picture above, the mudharabah scheme is explained in the following detail:
- The customer proposes financing to the bank to obtain venture capital.
- The bank provides 100% capital to be managed by customers who have certain expertise.
- When the contract is in progress the proportion of the results has been determined.
- If there is a loss when running a business that is not a negligence of the customer, then the loss is borne by the bank.
- After the business process is running, the profit is divided according to the provisions of the ratio. In addition, customers also return the principal to the bank.
Illustration of Mudharabah Scheme in Banking
For example, Adzkia is a devout Muslim and who understands religion, she wants to save her money in one of the Sharia Banks, namely Bank A. Because she wants to feel the investment results, Adzkia opens a savings account with a mudharabah agreement.
Adzkia saves its money to Bank A in the amount of 10 million with a profit sharing ratio of 20% for Adzkia and 80% for banks. On the other hand, Santos is a cattle farmer. To develop his business, he needs additional capital. He came to one of the Sharia Banks (call it Bank A) to get additional capital.
When Santos explained related to his need for capital for his business to Bank A, Bank A would conduct a screening to ensure that Santos was a mudarib suitable for mudharabah financing .
At the beginning of the contract, they will determine the profit sharing ratio from the profits of the Santos. For example, the agreed profit sharing ratio is 60% for Santos and 40% for Bank A. So when Santos starts to reap profits from his business, for example the profit is 10 million. So, 6 million (60% x 10 million) for the Santos and 4 million (40% x 10 million) for Bank A.
Impact on Mudharabah Adzkia Savings
The 6 million proceeds received by Bank A will also have an impact on increasing revenue from the Adzkia mudharabah savings account. In general the calculation for profit sharing to customers also includes the average monthly balance across Bank A. Let’s say the average balance in Bank A for mudharabah savings is 1 billion.
The formula used is (balance owned by Adzkia x Bank Profit A x 20%) / Average balance of mudharabah savings in Bank A. If entered, the calculation becomes (10,000,000 x 4,000,000 × 20%) / 1,000,000,000 = 8,000. So that the income received by Adzkia which will directly add to its mudharabah savings balance is Rp.8,000.
Simple Mudharabah Scheme
Mudharabah Agenda Scheme in Simple Form
Judging from the simple mudharabah contract scheme , the details of the system are as follows:
- Shahibul Maal(owner of the fund) gave away the money he had as capital and the mudarib (businessman) received the money so that a mudharabah contract was formed.
- From the funds already received by mudharib,it runs in the form of venture projects.
- As the venture progresses, the benefits of the venture should be shared with both the shahibul maaland If the project is making a profit then it should be shared based on the agreed upon ratio. However, in the event of loss, the loss is fully borne by the shahibul maal.
- Distribution of profits / losses to both parties.
Illustration of a Simple Mudharabah Scheme
Sound complicated? Not all the mudharabah seribet schemes are. There is a mudharabah scheme that is very simple, that is, mudharabah which is enough to bring two direct parties together, shahibul maal and mudharib.
Back to the story of Santos and Adzkia. Santos who has a business but is constrained to get capital meets with Adzkia who has capital for the Santos business. And they made a mudharabah agreement .
Adzkia deposited his money as much as 10 million to Santos as capital. They agreed on a profit sharing ratio of 60% for Santos and 40% for Adzkia. A large portion for Santos is because ideally the mudharabah scheme gives a large portion to the entrepreneur ( mudharib ).
Over time, within the span of a year Santos’s business had returned capital to get a profit of 1 million rupiah. So at that time Santos had to return the capital he used to Adzkia plus the share of his business proceeds of 400 thousand for Adzkia (40% x 1 million) and 600 thousand for Santos (60% x 1 million)
How about loss?
Then, what if the Santos business loses? In the banking system, Adzkia will not experience an impact on losses suffered by Santos. Because basically the Bank will not provide loss to customers.
Another story when using a simple mudharabah concept , Adzkia as an investor will bear a loss of 100% of the capital provided. For example, the Santos after managing his business suffered a loss of 2 million rupiah.
So, Adzkia must be tolerant to get back its capital is not intact. For example the Adzkia provides capital of 10 million in the beginning. Then, he will receive his money back as much as 8 million.
Justice in Mudharabah
Does Santos mean good? Adzkia only loses. Islam is famous for its concept of justice. Even in this contract, justice still happens. Because basically both incur losses.
Adzkia bears financial losses while Santos bears non-financial losses. Non-financial losses include energy, mind and time. Santos may not lose financially, but he loses financially because he has spent the energy, mind and time to manage the business.
As long as the Santos manages his business seriously without creating negligence or cheating, the Santos does not have the right to return the full capital of the Adzkia. Another case, if Santos intentionally manipulating his business or cheating. So, Santos must return the Adzkia’s capital.
Mudharabah in Contemporary Conditions
The development of mudharabah transactions to date has brought about a modification of mudharabah to Islamic financial institutions (LKS). The treaty is called the mudharabah musytarakah. Contrary to the previous two traditions , mudharabah musytarakah is a combination of mudharabah and musharakah.
Simply put, in this contract the entrepreneur ( mudarib ) includes his capital in the business he is running. This is different from the previous two mudharabah contracts in which the entrepreneur did not include his capital at all. When viewed from the definition, the mudharabah musytarakah contract looks the same as the musyarakah contract . However, what distinguishes between the two contracts is the existence of two stages of profit sharing. The following division:
- The first step is to distribute the benefits of the contract musyarakahAt this stage the worksheet works as a capitalist ( dwarf ). The ratio of the portion of capital to the determinant of the amount of profit that the worksheet will receive.
- The second stage is the distribution of profits from the mudharabahcontract . At this stage the profits which have been deducted from the results of the musyarakah contract are then distributed again by sharing the LKS as the manager ( mudharib ) and the customer as the owner of the capital ( shahibul maal ).
How to Invest with a Mudharabah Agreement
If you want to start to invest using the mudharabah scheme . You can choose investment paths, including:
- Islamic Banking, in general, Islamic banks have 2 forms of contract as their products offered to customers, namely mudharabahand You can choose mudharabah so that you can feel the investment results from the money you have saved at the Islamic bank.
- Non-Bank Islamic Financial Institutions, in this case you can choose to invest in sharia insurance, BPRS, BMT and so on who generally also use mudharabahcontracts .
- Financial Technology, there are several fintechs that offer investment products with mudharabah contracts . One such fintech is Qazwa . This Fintech connects capital owners (investors) with MSMEs that require funding. Mudharabah investment products offered provide quite favorable results.