Assigning a share of the capital to the agent in Mudhaarabah
Fatwa No: 276166


As-Salaamu 'alaikum wa rahmatullahi wa barakatuhu..., Firstly I would like to thank all of you for your efforts in providing such a noble service for the Muslims, we certainly appreciate it very much. May Allaah ta'aalaa reward you all immensely for your services. To proceed, I understand that one can engage in a business partnership contract, specifically a 'speculative partnership' (Shirkah Mudaaribah) wherein all partners share in the profit the amount whereof has previously been agreed upon between the investor (i.e rabb al-maal) and the worker or entrepreneur (i.e mudaarib). In this contract the investor (rabb al-maal) is the sole owner of the company or property and the entrepreneur or worker (mudaarib) does not hold any share in the 'ownership' of the company itself. Rather he only shares in the profit as mentioned. So my question is, can the mudaarib own a share of the company or property if he (the rabb al-maal) agrees to that? Also note that the mudaarib will not invest in the company any amount financially from himself , rather he will provide his time; services; and expertise only as is common in a shirkah mudaaribah contract. So is this permitted and still considered shirkah mudaaribah contract? Jazak Allaahu khairaan


All perfect praise be to Allaah, The Lord of the Worlds. I testify that there is none worthy of worship except Allaah, and that Muhammad, sallallaahu ‘alayhi wa sallam, is His Slave and Messenger.

The condition for the validity of the Mudhaarabah contract is that the profit is divided between the two parties according to a ratio, one-third or one-fourth or one-half, for example. If a known fixed amount is guaranteed as a profit share for either of them, then the Mudhaarabah contract becomes invalid. Therefore, it is impermissible to give the agent (Mudhaarib) a share of the capital in return for his services and effort because that share would mean guaranteeing a known fixed amount of profit for him whereas his share should be a ratio of the profit, if a profit is made.

Ibn Qudaamah  may  Allaah  have  mercy  upon  him said in his book Al-Mughni: "It is impermissible to stipulate a fixed amount of money to any of the partners. In brief, if a fixed amount is stipulated to any of the partners as a profit share, like a number of Dirhams for instance, or it is stipulated that he gets a ratio of the profit plus a fixed number of Dirhams, then the Mudhaarabah contract is invalid. Ibn Al-Munthir said: 'All scholars from whom knowledge is to be taken have agreed by consensus that Mudhaarabah is invalid if either or both partners stipulate for himself a fixed number of Dirhams.'"

Allaah Knows best.

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