MUSHARAKAH

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MUSHARAKAH

  1. 1. MAHYUDDIN KHALID  emkay@salam.uitm.edu.my
  2. 2. CONTENT  DEFINITION DEFINITION  EVIDENCE EVIDENCES  PILLARS OF MUSHARAKAH  TYPES OF MUSHARAKAH PILLARS  CONDITION OF MUSHARAKAH TYPES  MUSHARAKAH MUTANAQISAH  MODERN APPLICATIONCONDITIONSAPPLICATION 2
  3. 3. DEFINITION  Musharakah is also known as al-sharikah ( ) DEFINITION  Literally: EVIDENCES  Intermingling of properties whereby one cannot be differentiated from the other PILLARS  Mixing of two properties so that they could not be distinguished from each other TYPES  Technically:  An agreement between two or more parties toCONDITIONS combine their assets, labor or liabilities for the purpose of making a profit.APPLICATION 3
  4. 4. NATURE OF MUSHARAKAH  It is basically a profit and loss sharing partnership DEFINITION whereby the ratio for the distribution of profits must be determined and specified in advance EVIDENCES  If one partner is to be paid a fixed remuneration he PILLARS will not be deemed a partner  Each partner may dissolve the partnership at his/her TYPES pleasure provided he gives ample notice for the others.CONDITIONSAPPLICATION 4
  5. 5. EVIDENCE  Al-Qur‟an: DEFINITION EVIDENCES PILLARS TYPESCONDITIONSAPPLICATION 5
  6. 6. EVIDENCE  Hadith: DEFINITION  Reported by Abi Hurairah R.A that the Prophet S.A.W said “Allah had said that: “I am the third of EVIDENCES the partners, as long as any one of them does not PILLARS betray the other. If he/she does betray the other, I will withdraw (move away) from them” TYPES  Reported by As–Saib Al–Makhzumi R.A that he used to be a partner of the prophet S.A.W (inCONDITIONS business) before his prophet-hood. During the opening of Mecca he said to the prophet S.A.W:APPLICATION “Welcome my brother and partner!” 6
  7. 7. PILLARS OF MUSHARAKAH 1. Shuraka‟ DEFINITION  Shareholders EVIDENCES 2. Ra‟sul Mal  Capital PILLARS 3. Mashru‟  Project or business venture TYPES 4. RibhCONDITIONS  Pre-determined profit allocation 5. SighahAPPLICATION  Ijab (Offer)  Qabul (Acceptance ) 7
  8. 8. FLOWS OF MUSHARAKAH Profit DEFINITION EVIDENCES Shuraka‟ PILLARS (Shareholders) Ribh Ijab & Qabul Ra‟sul-Mal (Predeter TYPES mined Mashru‟ (Capital) profit (Project) Shuraka‟ rate)CONDITIONS (Shareholders)APPLICATION Profit 8
  9. 9. TYPES OF MUSHARAKAH DEFINITION Sharikah Ikhtiar Sharikah al-Milk EVIDENCES Musharakah (ownership partnership) Sharikah Jabr PILLARS Sharikah al-Mufawadhah (equal share) Sharikah al-Amwal (capital) TYPES Sharikah al-‟Inan (general) Sharikah al-A‟malCONDITIONS (labour) Sharikah al-„Aqd (contractual partnership) Sharikah al-WujuhAPPLICATION (goodwill/ credit) Sharikah al-Mudharabah (profit-sharing) 9
  10. 10. TYPES OF MUSHARAKAH DEFINITION SYIRKAH AL MILK • Joint ownership of two or more persons in a particular EVIDENCES property • Optional ownership – based on own option PILLARS • Compulsory ownership – automatically exists TYPES SYIRKAH AL „UQUDCONDITIONS • A partnership effected by a mutual contract or a joint commercial enterprise • Partnership in capitalAPPLICATION • Partnership in labour • Partnership in goodwill/credit • Profit sharing partnership 10
  11. 11. TYPES OF MUSHARAKAH DEFINITION Sharikat • A partnership of two or more to contribute the capital to finance a project and to share the profit al-Inan between them. EVIDENCES Sharikat • An equal partnership between two or more, where PILLARS each contributes the same amount of capital and to al-Mufawadah share the same amount of profit and work. TYPES Sharikat • A partnership of two or more to contribute theirCONDITIONS skill or craft. al-A‟malAPPLICATION Sharikat • A partnership of two or more without contributing capital. al-Wujuh 11
  12. 12. SHARIKAH AL-‘INAN  It is a partnership where two or more parties share the DEFINITION capital and the profit.  In this type of partnership, equality in the capital, EVIDENCES management, or in the distribution of profit is not a condition.  One of the partners may contribute more to the capital PILLARS than the others.  It is also allowed that one or more of the partners may TYPES manage the partnership while the rest may not participate.CONDITIONS  Partners are considered agents for each other whereby an action done by one of them in the ordinary course of business binds other partners. However, partners are notAPPLICATION guarantors for each other.  It is the most important form of partnership and close to the modern concept of business partnership 12
  13. 13. SHARIKAH AL-MUFAWADHA  Al-Mufawadha literally means equality or delegation. DEFINITION  Technically it refers to a partnership where two or more persons become partners in a venture on the condition to EVIDENCES equally contribute to the capital and management.  In this partnership all parties equally contribute to the PILLARS capital and management. They also equally share profit or losses. TYPES  Each partner is an agent as well as a surety or aCONDITIONS guarantor for the other partners.  A partner is liable for the actions of other partners. AnAPPLICATION undertaking by one of the partner binds all other partners provided it has been made in the ordinary course of business. 13
  14. 14. SHARIKAH AL-A’MAL  It refers to a type of partnership where two or more DEFINITION partners agree to work in partnership and share their earnings. EVIDENCES  This partnership has no monetary capital PILLARS  All partners jointly undertake to render some services for their customers, and the fee charged TYPES from them is distributed among the partners according to an agreed ratio.CONDITIONS  For e.g. if two tailors agree to undertake joint services for their customers on the condition that theAPPLICATION wages earned will go to a joint pool which shall be distributed between them irrespective of the volume of the work each partner has actually done. 14
  15. 15. SHARIKAH AL-WUJUH  Wujuh refers to goodwill, creditworthiness, and good reputation. DEFINITION  Bilateral agreement between two or more parties to conclude a partnership to buy asset on credit on the basis of their reputation EVIDENCES for the purpose of making profit.  Both parties do not contribute any capital. They purchase PILLARS commodities at a deferred price and sell them for cash.  The parties should determine the percentage of profit-sharing and of liability sharing. TYPES  This form of partnership has no monetary capital.CONDITIONS  In this case the profit will be distributed based on their shares in the goods bought. The same would apply to losses. They may also distribute the profit among them based on an agreed ratio.APPLICATION 15
  16. 16. CONDITIONS OF MUSHARAKAH  The Conditions Of Shareholders And Partners DEFINITION 1. The shareholders and partners must be qualified person to appoint an agent or to be appointed as an EVIDENCES agent under the principle of al-Wakalah. Each shareholder is considered as a joint owner of the PILLARS company and has a right to run the business for him and other shareholders when appointed as an agent. TYPES 2. Al-Musyarakah i.e. partnership and company based business can be made between individuals orCONDITIONS organizations.APPLICATION 16
  17. 17. CONDITIONS OF MUSHARAKAH  The Conditions Of Capital DEFINITION 1. The capital must be cash or things that can be valued by money. EVIDENCES 2. The capital must be pooled together and are not segregated so that it cannot be identified the owner of PILLARS actual share. 3. The amount of share is not determined to be of the TYPES same. 4. The shareholder can transfer his share to other person.CONDITIONS 5. The contract of al-Musharakah can be terminated to become a contract of ownership. As for example, a Bank has agreed to finance to project together with aAPPLICATION housing developer. At the time when the project has completed, the bank can sell his share to the developer so that it will become a sole owner of the property. 17
  18. 18. CONDITIONS OF MUSHARAKAH  The Conditions Of The Project DEFINITION  The project must be lawful according to Islamic law, i.e. it must be halal. The term “shariah compliance” is EVIDENCES widely used in current situations.  The evaluation for works carried out by the partners is PILLARS made on individual basis, but to be putted together so that the profit can be divided among them. TYPES  The shareholder can designate the work to one of them and it can be considered as a specified term or condition of the contract.CONDITIONS  The appointed shareholder who carried out the project is held responsible under the principle of Yad AmanahAPPLICATION (trust). In the case of his negligence he is held responsible for compensation under the principle of Yad Dhamanah (guarantee). 18
  19. 19. CONDITIONS OF MUSHARAKAH  The Conditions Of Profit DEFINITION 1. The ratio of profit sharing between al parties should be determined and mutually agreed at the conclusion of EVIDENCES the contract in the form of percentage of profit, not a sum of money or percentage of capital. This is very PILLARS important to avoid any element of gharar. 2. Loss sharing, except in the case of deceit or TYPES negligence, is according to percentage of shareholding.CONDITIONSAPPLICATION 19
  20. 20. DISSOLUTION OF MUSHARAKAH 1. When a partnership fulfills its obligation or when DEFINITION its duration is expired. EVIDENCES 2. By mutual consent of the parties. 3. By a request made by one of the parties which is PILLARS subsequently approved by other parties. 4. By death or incapacity of one of the parties whose TYPES heirs or their guardian decide to discontinue the partnership.CONDITIONS 5. The bankruptcy of the partners.APPLICATION 20
  21. 21. MUSHARAKAH MUTANAQISAH  Definition: DEFINITION  Form of partnership in which one of the partners promises (wa‟d) to buy the equity share of other partner gradually EVIDENCES until the title of the equity is completely transferred to him.  A form of Musharakah where the financier and the client PILLARS participate in a joint commercial enterprise or property. This enterprise is converted into undivided ownership of both the financier and the client. Over certain period TYPES the equity of financier, divided into equal value units, is purchased by the client. And ultimately the clientCONDITIONS becomes the sole owner of the enterprise  Application of Musharakah Mutanaqisah:APPLICATION  Home financing  Agriculture Machinery and implements financing  Storage facility construction/sheds  Transport vehicles, etc. 21
  22. 22. MODERN APPLICATION  Project financing DEFINITION  Import/export financing EVIDENCES  Working capital financing  Saving/Current/Investment account PILLARS  Interbank lending/borrowing TYPES  Securitization  Sukuk MusyarakahCONDITIONSAPPLICATION 22
  23. 23. END OF CHAPTER DEFINITION EVIDENCES PILLARS TYPES CONDITIONSAPPLICATION 23

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