CONTENTS

NO.

ITEMS

PAGE

Definition of Mudharabah

Pillars of Mudharabah

2-3

Condition of pillars

4-5

Type of Mudharabah

6-7

Concept of Mudharabah

8-9

Mudharabah Applications in Banking dan

10-13

Takaful
7

Termination of Mudharabah

14-15

DEFINITION OF MUDHARABAH
Mudarabah derived from dharba on earth which means to travel far trade or
business.

Meaning :
Allah says,others (making dharb on earth) travelling through the land, seeking of
Allahs bounty

(Surah Muzammilayat 20)

Mudharabah also known as business cooperation between two parties, where the first
party to provide the entire capital (Rabbul mal) while the other becomes the manager
(mudarib). Business profits are divided according to the agreements stipulated in the
contract. Usually called a percentage (ratio).

DEFINITION OF MUDARABAH FROM OTHER PERSPECTIVE

Malikis : an agency for trading in delivered cash for a part profits.
Shafiis : an agreement whereby owners hand over capital to a worker who trades with it
and the profits is to be shared between them.
Hanbalis : a contract in which a person gives his capital to another for business in order to
share the profit according to their stipulation.
Hanafis : a partnership for participation in which capital is provided from one side,
whereas labour or skill is from the other side.

THE PILLARS OF MUDARABAH

The sect of Syafii, Maliki and Hanbali was established that there were 5
pillar in Mudarabah :
Rabbul-mal
The capital- provider or financier.
Mudarib
Agent or representative in the deal in property in mudarabah.
Work
The work done by dealing with property Mudarib with Mudarabah by buying
and selling and other work related done with the purpose of making a profit.
Capital
Capital should be known and given to care taker (mudarib), also it should be
in monetary value like gold, silver or a common monetary exchange. It
should not be in form of goods, unless the value of the goods is calculated
based on value of money at the time the transaction taken place, so the value
of the goods become the capital of Mudarabah.
Profit
Profit sharing is done based on the agreement by both parties, but the investor
need to bear all the loss. Profit sharing should be done after final calculation
has been done for the cooperation.

Sighah
Sighah is saying the transaction by both parties who join the cooperation. It
shows the expression and desire of doing the cooperation. The Mudarabah
transaction is considered valid by saying the desire of doing the cooperation
and by doing the transaction.

Conditions of Pillars
Capital owner (Rabbul Mal)
Someone who already puberty and rational. Rabbul Mal also must be a freedom person
because a slave has not the rights of capital and cannot appoint a representative. Imam
Syafii said that a little child cannot made the Mudharabah contract because he/she still
in his/her family dependents.

Entrepreneur (Mudharib)
Must be a person who has ability to manage the capital from Rabbul Mal. Mudharib must
has these characteristics like : can think rational, not crazy, not a child who lacks, not an
idiot who wasted property and Mudharib must be the puberty person.

Profit
Profit sharing has to be specified at the time that Rabbul Mal and Entreprenuer make the
Mudharabah contract. It cannot be divided base on capital. It also cannot distributed to
another person that not in the Mudharabah contract.

Sighah
Ijab and Qabul that expressed by Rabbul Mal and Mudharib in the Mudharabah contract.
Occurrence of sighah when the Rabbul Mal hand over his/her capital to Mudharib to be
traded.Profit sharing is determined at this time before run the business.

Capital
Using cash money, gold dinar and or the current currency. Commodities (goods) cannot be
the capital of Mudharabah. Capital also must follow the following condition:
- Capital must be in the form of money
- The amount of money must be clearly defined
- The capital must be in cash not debt
- The Rabbul Mal has to hand over the capital to Mudharib

TYPES OF MUDHARABAH

MUDHARABAH
MUDHARABAH
MUTLAQAH

MUDHARABAH
MUQAYYADAH

MUDHARABAH MUTLAQAH
Form of cooperation between owners of capital with managers whose scope is very
broad and not limited.
Rabbul Mall give opportunity to Mudarib to choose any type of business.

MUDHARABAH MUTLAQAH is the contract of Mudharabah that has not conditions

about time, place, type of business and all. The example of Ijab and Qabul of Mudharabah
Mutlaqah is : I leave the property to you as Mudharabah capital and the profits to be
shared between us at the rate of . (Saya serahkan harta ini kepada kamu sebagai modal
Mudharabah dan keuntungannya menjadi perkongsian antara kita pada kadar )

MUDHARABAH MUQAYYADAH
Opposite of al-Mudarabah al-muthlaqah, which is a partnership between the
owners of capital with a manager who is accompanied by restrictions in the kind of
effort,time,place,people who control the business.

MUDHARABAH MUQAYYADAH is the contract of Mudharabah that has conditions

about time, place, type of business, type of goods to traded and the person who are in the
process of purchase and sell. We also call it as Qayyid in Mudharabah.
Qayyid of time
The determination of time to end the Mudharabah contract. In the Mazhab Syafii, we
cannot have the determination of time because it will restrict the Mudharib to do the
business or work in freedom.
Qayyid of place
It happen when the Rabbul Mal make the condition in the contract of Mudharabah about
where the Mudharib has to do the business using the capital from Rabbul Mal. For
example, when they make the contract, the Rabbul Mal tell the Mudharib that he/she has to
do the business in a certain place such as: in a certain shop, at a certain market, in a
certain city and all.
Qayyid of type of business
The type of business must according the order of Rabbul Mal. It will be in two ways : cash
business and credit business.
Qayyid of type of goods that to be traded
The type of goods that to be traded are also according the order of Rabbul Mal. If the
Rabbul Mal ask the Mudharib to do the food business, so Mudharib only can do the food
business using the capital. He/she cannot do another business.

CONCEPT OF MUDHARABAH

Investor
(Rabbul Mal)

Entreprenuer
(Mudarib)
Capital

Invest in project
Profit

Mudarabah is the basis of modern Islamic banking on a two-tier basis.

1st tier: The depositors put their money into the bank's investment account and agree to
share profits with it. In this case, the depositors are the providers of the capital and the
bank functions as the manager of funds.

2nd tier: Entrepreneurs seek finance from the bank for their businesses on the condition
that profits accruing from their business will be shared between them and the bank in a
mutually agreed proportion, but that any loss will be borne by the bank only. In this case,
the bank functions as the provider of capital and the entrepreneur functions as the
manager.

Thus, under an Islamic banking system, the cost of capital is not analogous to a zero
interest rate, as some people wrongly assume it to be. The only difference between Islamic
banking and interest-based banking in this respect is that the cost of capital in interestbased banking is a predetermined fixed rate, while in Islamic banking, it is expressed as a
ratio of profit.

Mudharabah Applications in Banking and

Takaful
The concept of mudarabah in Islamic fiqh generally presumes that these contracts
are for initiating a joint venture whereby all the partners participate in the business from its
inception and continue as partners until the end of the business when all assets are
liquidated. The concept of a running business where partners are able to either join or
leave the enterprise without affecting the continuity of the business is a foreign concept to
the traditional Islamic fiqh.

Mudharabah contract applications

Mudharabah financing is a financing agreement between the Bank and mudharib, where
banks provide 100% financing for certain activities of mudharib effort, while mudharib
runs the business without bank intervention.

Bank has the right to submit motions and doing surveillance on the provision of funds for
the financing bank rewarded or given in the form of profit ratio is determined largely on
the basis of the consent of both parties. When there is a loss on these efforts fully then the
loss incurred by the bank unless the loss of default mudharib itself.

By looking at the contemporary Islamic Financial Institutions products which are operated
under the concept of mudarabah, we will discover the concept of numerous types of
products. Among others are as follows:

Current account

Special investment account

Islamic insurance (takaful)

Islamic bond issuance (sukuk)

Corporate financing

Working capital financing

Interbank Money Market

Project Financing

Mudharabah benefits
Bank will enjoy an increase in a certain amount of profit when mudharib increased effort.
The Bank is not obliged to pay a certain amount of financing to customers on a regular
basis, but adjusted earnings / bank efforts.
Return tree adapted financing cash flow / cash flow of customers, so as not to incriminate
customers.
Banks will be more selective and careful (prudent) search effort really clean, safe and
profitable. This is because profits actually received that are divided.

In addition to the benefits to be received by the bank, Mudharabah financing are also at
risk include:

a. Asymmetric information problem that one of the tendencies that dominate a lot more
information to be honest. As funding for fixing the results should be done with attention to
incentive compatible constraints (the limits to provide an incentive to customers to be
honest).
b. Side stream of customers using the fund was not as mentioned in the contract.
c. Default and deliberate offense.

BANKING
Savings Account-i Mudharabah
Islamic Bank offers the convenience of unique based Savings Account. This facility is
based Mudharabah contract involving the concept of profit sharing. You will enjoy the
benefits of investing in the ratio previously determined.

FEATURES
When Opening a savings account Minimum

RM100.00

Minimum Balance

RM25.00

Age Requirements

Open to all individuals aged 12 years and over

Account Type

Individual Account For those aged 12 years

and over
Account Trustee (Trustee) For children
under the age of 12 years must open an
account together an adult
Joint Account You can open an account
together other individuals

Contract

Mudharabah

TAKAFUL
Mudharabah applications in operations Takaful Nasional
The participants also made aqad mudharabah (surplus sharing) on an agreed ratio.
Even so, this is just aqad side and that there is a surplus in the fund can be taken by the
company because the company has leveraged its expertise in managing funds.
Right of the participant to enjoy the surplus funds were recognized based on the concept of
mutual agreement (mutual consent) between them in the distribution of this surplus or
mudharabah.
For Family Takaful products, the ratio between the participants and the Takaful Nasional
is 80:20 which was 80% for participants and 20% of the company.
While for General Takaful products, the ratio between the participants and the Takaful
Nasional is 50:50 which was 50% for participants and 50% to the company.
Al-Mudharabah Sample text as included in the Certificate

General Takaful
If after the end of the takaful period, there is a net surplus of the general takaful fund, it
will be shared between participants and companies with a ratio of 50:50 provided the
participant does not make any claim or receive any benefits during the period of takaful
force.

Family Takaful
If after the end of the takaful period, there is a net surplus of the Fund, it will be shared
between participants and companies with 80:20 ratio, provided the participant does not
make any claim or receive any benefits during the period of takaful force.

The Termination of Mudharabah

The Termination of Mudharabah will happen in the following situation:

A party wants to cancel the contract of Mudharabah

If one of the party that made the contract of Mudharabah wants to cancel the contract, they
can cancel the contract whenever they want before they manage the Mudharabah business

Death of capitals owner (Rabbul Mal)

If the Rabbul Mal who has make contract pass away, Mudharib must return the capital to
Rabbul Mals heir. But, if the heir wants to continue the contact with the same Mudharib,
he/she should know how much the real value of that capital, then he/she has to make new
contract because the late contract was already canceled.

Death of entrepreneur (Mudharib)

While if the Mudharib who has make contract pass away, his/her heir must return the
Rabbul Mals capital because the contact was canceled.

Rabbul Mal or Mudharib become insane

When one of the person make contract either Rabbul Mal or Mudharib being insane, the
contract of Mudharabah will automatically terminate. If the Rabbul Mal being insane
while the Mudharib still doing the Mudharabah work, the Mudharib is considered as
confiscate the Rabbul Mals capital.

Damage of capital
If the capital damage before the Mudharib do the business, the contract of Mudharabah is
automatically terminate. While if the capital damage after the Mudharib do the business,
the capital has to be back up by the profit from that Mudharabah.

Apostate (Murtad)
The apostasy will terminte the contract of Mudharabah. The committed suicide also be
included in apostate.

Bankruptcy
If the Rabbul Mal bankrupt, the contract will automatically terminate. While if the
bankrupt person is Mudharib, it does not affect the contract.

REFERENCES

MudarabahdalamFiqh Islam ; YusofRamli

Contract & The Products of Islamic Banking ; ZaharuddinAbdRahman

AIMS-UK Islamic Banking & Finance | Online Certifications | Training &

Consultancy
Reference: Mufti Mohammad TaqiUsmani& Mohammed Obaidullah

PDF File

Muslim Teens ; Magazine

Islamic Commercial Law (Fiqh al-Muamalat) ; Securities Commision Law.