Who isn’t tempted by the promise of immense wealth in this world and paradise in the afterlife? This is surely the dream of all of us. So, it’s no surprise that enthusiasm for financial migration and ridding our wealth of usury is currently at an all-time high. We want to increase our assets, but through paths that please Allah ﷻ.
To achieve this, we certainly can’t just leave our money under our pillows. Therefore, we need a platform to allow this wealth to circulate productively while still adhering to Islamic principles. Of the many options for developing our existing assets, one popular option is the mudarabah contract.
Imagine you have capital but no time, while someone else is a business whiz but has no capital. It’s a perfect fit, isn’t it?
This is the beautiful solution offered by the mudarabah contract. The principle is simple yet powerful: “We provide the capital, they do the work, profits are shared, and losses are borne.”
But, frankly, we need to be extra vigilant. Because these products are so eager to compete in the market, sometimes there are modifications that actually make the mudarabah contract flawed according to Islamic jurisprudence. Instead of bringing us blessings, we could end up slipping back into usury without realizing it.
So that we don’t just buy the “label”, let’s dissect the 3 fatal flaws that often creep into today ‘s mudarabah contracts , complete with the reasons.
1. 100% Capital Guarantee
We often hear this sentence:
“Don’t worry, investing here is safe. If you lose, we’ll return your capital in full.”
It sounds reassuring, but this is precisely the problem that is making it flawed.
In Islam, a mudarabah contract is a partnership ( syirkah ) contract. The principle is: “Profits are shared, losses are borne together” (the investor loses money, the manager loses effort). Therefore, capital cannot be pledged as collateral. This is because this contract is a trust and partnership, not a loan.
If the capital is guaranteed to be returned, the contract becomes a debt (Qardh). You become the lender, and the manager becomes the borrower.
Even though the rules of Islamic jurisprudence state:
كُلُّ قَرْضٍ جَرَّ نَفْعًا فَهُوَ رِبًا
“Every debt that brings (additional) benefit is usury.”
When capital is guaranteed and profit sharing is maintained, we are essentially profiting from debt. This is usury, even though it’s called investment.
Therefore, in a mudarabah contract, we must be willing to take the risk of loss. If you don’t want to take this risk and want to guarantee your money is intact, it’s better to keep it in a safe.
Also read: Career Woman Guidelines to Stay Islamic Compliant
2. Promise to Buy Back at the Initial Price (Wa’ad Mulzim)
The second mode is more subtle. It usually reads:
“At the end of the period, we will buy back the assets at the initial price.”
At first glance, it looks like a normal transaction, but it’s actually a fabrication (ḥīlah) to secure capital. This eliminates market risk, despite the fact that asset prices fluctuate.
If you are forced to buy at the initial price even though the market price is falling, it is the same as forcing the money back in full like a debt.
From ‘Amr bin Syu’aib, from his father, from his grandfather radhiyallahu ‘anhum, he said: The Messenger of Allah ﷺ said:
لَا يَحِلُّ سَلَفٌ وَبَيْعٌ، وَلَا شَرْطَانِ فِي بَيْعٍ، وَلَا رِبْحُ مَا لَمْ يُضْمَنْ، وَلَا بَيْعُ مَا لَيْسَ عِنْدَكَ
“It is not halal to combine a loan contract with a sale and purchase, nor are there two conditions in one transaction, you are not allowed to take advantage of something that you do not bear the risk of, and you are not allowed to sell something you don’t already own.” ( HR. At-Tirmidhi , Abu Dawud, An-Nasa’i, Ibn Majah; authenticated by At-Tirmidhi, Ibn Khuzaimah, and Al-Hakim)
Profit in Islam must be commensurate with the responsibility for risk. Anyone seeking profit must be prepared to bear the possibility of loss. If profit is obtained without risk (for example, with a guaranteed return of capital), then it is not halal.
Also read: The Urgency of Female Doctors and Nurse in Maternity Hospitals
3. Fixed Income of a Certain Amount of Rupiah Every Month
This is the most tempting:
“Capital of 100 million, guaranteed profit of 5 million per month.”
The problem is, business is never stable. Profit and loss are the law of the land.
Be careful with investments that feel like they’re just a paycheck. Real business has ups and downs. Ensuring a profit margin upfront is unjust. If the business loses money but the manager is obligated to pay you, that’s unjust to them. If you make a large profit but only receive small change, that’s unjust to you.
Allah ﷻ says:
يَا أَيُّهَا الَّذِينَ آمَنُوا لَا تَأْكُلُوا أَمْوَالَكُمْ بَيْنَكُمْ بِالْبَاطِلِ
you who believe, do not consume one another’s wealth unjustly. ( QS . An-Nisa ‘: 29)
Setting a fixed profit in a mudarabah contract without considering the profit and loss of the business is considered to be consuming assets in a wrong way, because one of the parties will definitely suffer a loss.
Apart from that, one of the valid conditions for a mudarabah contract is that profits are divided based on a percentage/ratio (e.g. 20:80), not a fixed nominal amount.
Imam Ibn Qudamah رحمه الله said:
“If one of the parties stipulates a certain profit (nominal), then the mudarabah contract is void.” ( Al-Mughni , 5/23)
So, the right key is to look for a contract that clearly uses a profit-sharing percentage of net profit, not a fixed nominal promise.
Also read: Why Do We Need Female Teachers So Much?
So, What Should We Do?
Let’s check your investment contract to ensure that our financial migration reaches its destination safely and avoids the three pitfalls mentioned above. If you find any of the three points above, don’t panic. Invite the manager to discuss and amend the agreement (addendum). If the manager refuses, it may be a sign from Allah that we should look for four others who are more blessed in accordance with Sharia law.
We must understand that in Islam a Muslim is not only after profit, but also peace of mind with the blessing of Allah ﷻ . Remember, even if it is small, halal wealth and blessings are much more enjoyable than abundant wealth mixed with the embers of usury.
Come on, read this prayer often,
اللهم اكفني بحلالك عن حرامك، وأغنني بفضلك عمن سواك
“O Allah, suffice us with Your halal sustenance so that we avoid the haram, and enrich us with Your bounty so that we do not depend on anyone other than You.” ( HR. At-Tirmidhi )
May Allah ﷻ guide our steps in muamalah, cleanse our wealth from the doubtful and haram, and make our sustenance full of blessings. Amen.
Also read: Zainab binti Jahsy, An Example of a Shar’i Working Woman
Let’s Visit, Zeed and join for halal investment with Zeed.
Author: Redha Sindarotama
Reference:
Al-Qur’an al-Karim. Accessed from: https://quran.com/
At-Tirmidhi, M. bin ‘Isa. Sunan at-Tirmidhi . Beirut: Dār al-Gharb al-Islāmī. Accessed from: https://sunnah.com/bulugh/7/24
Imam Nawawi, comp. Riyāḍ as-Ṣāliḥīn (The Gardens of the Righteous), Buku Ad-Duʿā’ (Supplications), Hadith 1486. Accessed from: https://sunnah.com/riyadussalihin:1486
Ibn Qudamah al-Maqdisi. Al-Mughni . Juz 5. Beirut: Dār al-Kutub al-‘Ilmiyyah. Accessed from: https://archive.org/details/al-mughni
An-Nawawi, Y. bin Syaraf. Al-Majmū’ Syarḥ al-Muhadzdzab . Beirut: Dar al-Fikr.
Ibn Rushd al-Qurthubi. Bidāyatul Mujtahid wa Nihāyatul Muqtashid . Beirut: Dār al-Hadith. Accessed from: https://archive.org/details/terjemah-bidayatul-mujtahidin-2-ibnu-rusy
Az-Zuhaili, Wahbah. Al-Fiqh al-Islāmī wa Adillatuh . Damascus: Dār al-Fikr.