Mudharaba of Shari’a Bank: Sharing Usury that is masked with the label “Shari’a”

Scholarship from Bank

Sharing Usury that is masked with the label “Shari’a”

Inside the practice of mudharaba product in shari’a bank, there is a controversial stipulation, that is: the mudharib (fund manager) is required to give full warranty over the fund lent by bank from any kind of loss. The product is considered as a new invention in mudharaba that is never been seen before. It is called mudharabah musytarakah.

mudharabah musytarakah is a combination of two words, mudharabah and musytarakah.

The meaning of mudharaba is transaction of investment between the funder (money/asset owner/shahibul mal) and the fund manager (mudharib) to start a certain business with profit-sharing system based on percentage agreed by both parties, whereas the loss of capital will only be borne by the funder.

Musytarakah means: union, combination or group. Thus essentially, Mudharabah musytarakah is a common mudharaba modified into a product of shari’a bank to replace  saving/deposit with interest of conventional bank.

Next, The writer mentions about definition and stipulation of mudharabah musytarakah according to the Majma’ Al-Fiqh Al-Islami (OKI’s jurisprudence division) in council’s verdict No. 123 (5/13) 2001.

Relationship between Mudharabah Musytarakah and Usury in Debt

Basically, status of mudharabah musytarakah is permitted. However, after it is claimed as product of shari’a bank, some researchers in shari’a economy added a stipulation which stated that the fund given by client to shari’a bank that is managed in the contract of mudharaba will get a warranty from the manager (bank as the fund manager), as applied in conventional bank. Moreover, not only the main fund from saving that is guaranteed, but also its interest or bonus. (See: Dr. Yusuf As-Syubaily, “Khadamat Ististmariyyah fil Masharif”,  volume I, page 270. Dr. Iyadh Al-Anzy, “Asy-Syuruth At-Ta’widhiyyah”, volume II, page 761).

Those researchers argued by analogized mudharabah musytarakah as ajir musytarak (person who is paid for working to serve many people, such as a tailor who receive order from many people).

The ruling of ajir musytarak is different with ajir khas (person who is paid for serving certain people, such as private driver). Ajir khas doesn’t obliged to replace any loss on thing he uses, if any damage or loss happens without his …. Such as car damage in traffic accident that is out of the driver’s will. It is different with Ajir musytarak, who is obliged to guarantee all goods that belong to his client, in any kind of condition, except for a general catastrophe, such as a fire that engulfs his store that comes from other store. This is the opinion of the school of Hanbali. (See: Al Buhuty, “Kasysyaful Qina'”, volume IV, page 26)

However, their argumentation isn’t strong, since it doesn’t fulfill the requirement of analogy (qiyas). Such analogy is dubbed as qiyas ma’al fariq (analogizing two cases that are principally different), because ajir musytarak is different with mudharabah musytarakah. Ajir musytarak receives a wage that has been agreed since the beginning,  whereas in mudharabah musytarakah, manager might get some profit or not.

Hence, stipulation that states that a manager is obliged to guarantee client’s fund in the contract of mudharabah musytarakah was strongly opposed by the scholars thus the Majma’ Al Fiqh Al Islami (OKI’s jurisprudence division) issued a verdict in its XIII council in Kuwait, No. 123 (5/3) 2001, which stated that,

“Mudharib (manager) is a party that entrusted with a mandate, he is not giving a guarantee over the fund if any loss happened, or it lost, unless he is careless with the mandate, or he violate shari’a law, or investment rules. This ruling applies for mudharabah fardiyyah (individual) and mudharabah musytarakah. And this ruling is not changed with the argument of analogy with mudharabah musytarakah. (Journal Islamic Fiqh Council, XIII edition, volume III, page 291)

The scholars who prohibited the stipulation that states that a manager is obligee to guarantee investor’s fund from any loss gave several argumentations:

  1. Ijma’ (consensus) of scholars since the first century until now, that if it is stipulated that the manager guarantee the capital from losses then this stipulation is invalid.

Ibn Qudama (scholar of the school of Hanbali, dies year 628 H) said, “If it is stipulated that the mudharib (manager) should guarantee the fund from any losses, then this stipulation is invalid, and there’s no difference in opinion among scholars regarding this matter.” (See: Al Mughni, volume VII, page 176)

  1. Principal difference between mudharaba and qardh (credit) is that the fund received by manager is not guaranteed from loss, whereas the fund received by creditor must be guaranteed by the debtor.

If the mudharib (manager) is stipulated to guarantee the fund that he receives from losses, the contract of mudharaba turns into qardh, And when the funder receives his sharing of profit, essentially, he receives an interest (usury), because the contract of mudharaba has turned into the contract of loan with unfix interest. And the scholars have agreed that this is forbidden because it is included in usury in debt (riba dayn). (See: Dr. Iyadh Al Anzy, “Asy Syuruth At Ta’widhiyyah”, volume II, page 762 )

Dr. Erwandi Tarmidzi – Postgraduate alumnae of univ. Muhammad Su’ud, majoring in Islamic law (Fiqh).

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