Musyarakah Essay

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FINANCIAL SECTOR TALENT ENRICHMENT PROGRAMME

FUNDAMENTALS OF SHARIAH
presented by

Ahmad Sanusi Husain

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CONTENTS

1. Participating Contracts - Types of Participating Contracts - Essential Elements - Necessary Conditions 2. Supporting Contracts - Types of Supporting Contracts - Essential Elements - Necessary Conditions

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TYPES OF PARTICIPATING CONTRACTS
Shirkat (Partnership)

Shirkat Milk (Holding Partnership)
Inheritance (Faraid) Will (Wasiyyat) Mudharabah (Trustee Partnership) Shirkat Amwal (Partnership in capital)

Shirkat Uqud (Contractual Partnership)

Shirkat A’amal (Abdan) (Partnership in work)

Shirkat Wujuh (Receivable partnership)

Shirkat Mufawada (equal shares)

Shirkat Inan (unequal shares)

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PARTICIPATING CONTRACTS Definitions of Musharakah and Mudharabah Musharakah is a general partnership whereby two or more parties enter into a contract to exploit their labour and capital jointly and to share the profits and loses of the partnership. Mudharabah is a contract where the owner of capital entrusts his funds to an entrepreneur who contributes skills is business and the profits generated is to be shared between them. 4

There are five essential elements of Musharakah and six of Mudharabah as follows. Musharakah (i) partners (ii) capital (iii) business (iv) profit sharing and (v) contract Mudharabah (i) owner(s) of capital (ii) entrepreneur (iii) capital (iv) business (v) profit sharing (vi) contract

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(1)

Musharakah There are 16 necessary conditions relating to its essential elements. (1) Contract There are three necessary conditions, i.e.: (i) in definite and decisive language. In the present or past tense, not future tense nor imperative (ii) acceptance must agree with offer and (iii) offer and acceptance made at the one and the same meeting 6

(2)

Partners must meet the following four necessary conditions: (i) capable of taking responsibility, i.e. of sound mind reached the age of puberty reached majority (18 years old)

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(ii)

not prohibited from dealing with their properties: - not declared bankrupts or - not declared prodigals no coercion is exerted on them capable of appointing agents and be appointed as agents.

(iii) (iv)

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(3)

Capital There are five necessary conditions: (i) (ii) (iii) (iv) (v) any asset valued in money not debt specific amount from all partners paid into capital fund

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(4) Business There are two necessary conditions: (i) (ii) halal and managed by all the partners

(5) Profit/ Loss Sharing There are two necessary conditions: (i) (ii) according to proportion of shares or according to agreement in fraction, ratio or percentage, not in absolute amount. loss born by all partners according to proportion of shares 10

(2)

Mudharabah There are 16 necessary conditions relating to its essential elements. (1) Contract There are three necessary conditions, i.e.: (i) in definite and decisive language. In the present or past tense, not future tense nor imperative (ii) acceptance must agree with offer and (iii) offer and acceptance made at the one and the same meeting 11

(2) and (3) Owner(s) of Capital and Entrepreneur must meet the following four necessary conditions: (i) capable of taking responsibility, i.e. of sound mind reached the age of puberty reached majority ( 18 years old)

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(ii)

not prohibited from dealing with their properties: - not declared bankrupts or - not declared prodigals no coercion is exerted on them capable of appointing agents and be appointed as agents.

(iii) (iv)

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(4)

Capital There are five conditions: (i) money only (ii) not debt (iii) specific amount (iv) from owner(s) of capital only (v) paid to entrepreneur

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(5)

Business There are two necessary conditions. (i) halal (ii) managed by entrepreneur only

(6)

Profit Sharing The two necessary conditions are: (i) profit shared according to agreement in fraction, ratio or percentage,...
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