Islamic Ruling on Mudharib (in Mudharabah) Taking Profits Before the Final Calculation
Mudharabah is a form of partnership in Islamic economic systems involving two main parties: the capital provider (shahibul maal) and the entrepreneur or manager (mudharib). The capital provider supplies the funds, while the mudharib manages the business using those funds. Profits are shared according to a pre-agreed ratio, while losses are borne by the shahibul maal, except when losses occur due to negligence or fraud by the mudharib. A common question arises regarding whether a mudharib can take a share of the profits before the final accounting. This article will explore the ruling on this matter, as well as the relevant Islamic legal considerations that apply to mudharabah.
The Mechanism of Mudharabah in Islam
In a mudharabah contract, the shahibul maal provides capital to the mudharib for business management. Mudharabah is typically executed with specific conditions agreed upon at the outset, including the profit-sharing ratio. The primary objective of mudharabah is to generate profits through effective management of capital by the mudharib. The profits are then divided according to the agreed ratio, for example, 60:40 or 70:30.
However, issues arise when a mudharib wants to take his share of the profits before the entire business outcome is fully calculated. This needs careful consideration to avoid any breach of Islamic principles governing mudharabah agreements.
The Ruling on Taking Profits Before the Final Calculation
Islamic scholars and fatwa bodies generally emphasize the importance of fairness in mudharabah contracts. As a general rule, a mudharib is not allowed to take a share of the profits before the final calculation is completed because the status of the profits remains uncertain and may fluctuate as the business progresses. Thus, profits are considered definitive only after all expenses and liabilities of the business have been settled.
However, there are specific exceptions, particularly if there is an agreement between the shahibul maal and the mudharib allowing the mudharib to take profits in advance. For example, an agreement may permit the mudharib to use a portion of the profits to cover operational costs or living expenses. Such agreements must be clearly outlined in the contract and agreed upon by both parties to prevent future disputes.
Also read:How Abdul Malik bin Marwan Shaped Early Islamic Economic Policies?
Explanation from the Ma’ayir Shari’ah on Mudharabah
The Ma’ayir Shari’ah or Shariah standards issued by the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) provide crucial guidelines on profit distribution in mudharabah. One of the principles is outlined in point 8/7:
“لا ربح في المضاربة إلا بعد سلامة رأس المال، ومتى حصلت خسارة في عمليات المضاربة جبرت من أرباح العمليات الأخرى. فالخسارة السابقة يجبرها الربح اللاحق، والعبرة بجملة نتائج الأعمال عند التصفية.”
This means that profits in mudharabah can only be taken after the initial invested capital is secure and intact. If losses occur in the mudharabah operations, those losses must first be offset against future profits before any profit distribution can take place. In other words, past losses must be covered by subsequent gains, and the overall outcome of the business is considered at the time of liquidation.
Additionally, it is stated:
“فإذا كانت الخسارة عند تصفية العمليات أكثر من الربح؛ يحسم رصيد الخسارة من رأس المال، ولا يتحمل المضارب منه شيئًا، باعتباره أمينا، ما لم يثبت التعدي أو التقصير، وإذا كانت المصروفات على قدر الإيرادات يتسلم رب المال رأس ماله، وليس للمضارب شيء. ومتى تحقق ربح، فإنه يوزع بين الطرفين وفق الاتفاق بينهما.”
This means that if, upon liquidation, the losses exceed the profits, the loss will be deducted from the initial capital, and the mudharib is not liable for these losses unless proven to have been negligent or in breach of duty. As a trustee (ameen), the mudharib is only responsible if there is evidence of negligence or misconduct. If the business expenses equal the revenues, the shahibul maal will only receive the return of their original capital, with no profit share allocated to the mudharib. However, if a profit is realized, it is to be distributed according to the initial agreement between the parties.
In point 8/8, further explanation is provided:
“يستحق المضارب نصيبه من الربح بمجرد ظهوره (تحققه) في عمليات المضاربة، ولكنه ملك غير مستقر، إذ يكون محبوسا وقاية لرأس المال، فلا يتأكد إلا بالقسمة عند التنضيض الحقيقي، أو الحكمي. ويجوز تقسيم ما ظهر من ربح بين الطرفين تحت الحساب، ويراجع ما دفع مقدما تحت الحساب عند التنضيض الحقيقي أو الحكمي.”
This indicates that the mudharib is entitled to their share of the profits as soon as they appear (are realized) in the mudharabah activities, but this entitlement is not fully settled. These profits remain withheld as a guarantee for the capital until the liquidation is completed, either through actual or estimated accounting. Thus, any profit distribution that occurs before the final liquidation is considered provisional and will be reviewed during the complete or estimated liquidation process.
Finally, this provision emphasizes that profit distribution is finalized based on the actual sale value of the business assets, known as tandiz haqiqi (actual liquidation). This means that a legitimate and final profit distribution only takes place after the business’s assets are sold and the proceeds are fully accounted for.
Also read:The Legacy of Khadeejah: Sacrificing Wealth for the Prophet ﷺ
Conclusion
Based on the above explanation, the ruling on a mudharib taking profits before the final calculation depends significantly on the agreement between the mudharib and the shahibul maal and the relevant Shariah provisions. Generally, the mudharib is not permitted to take a share of the profits before the final calculation is completed unless there is a clear agreement allowing such an arrangement. It is crucial for both parties to adhere to principles of fairness, transparency, and the agreements outlined in the contract to ensure a harmonious partnership that aligns with Islamic law. By following the Ma’ayir Shari’ah, a mudharabah venture can be conducted with blessings and bring benefits to all parties involved.
References
Islam Archive. (2023). أحكام استفادة المضارب من الربح قبل الحساب النهائي ومصاريف التجارة والبضاعة الجديدة. Diakses dari https://islamarchive.cc/fatwaa_show_453571_4
Islamqa. (2023). كيف يقسم الربح في المضاربة الطويلة وهل للعامل أن يأخذ منه تحت الحساب. Diakses dari https://islamqa.info/index.php/ar/answers/327694/
Islamweb. (2023). أحكام استفادة المضارب من الربح قبل الحساب النهائي ومصاريف التجارة والبضاعة الجديدة. Diakses dari https://islamweb.net/ar/fatwa/453571/
