KULIYYAH OF ECONOMICS AND MANAGEMENT SCINECES | ISLAMIC ACCOUNTING AND FINANCE |
MASTER OF SCIENCE (FINANCE) | ACC6810 |
ACCOUNTING IMPLICATIONS OF JIONT MUDARABAH (MUDARABAH MUSHTARAKAH)
SUBMITTED TO: Prof. Dr. Abdul Rahim Abdul Rahman
Basheer Hussein Altarturi G1111009
1 Introduction 3
2 Mudarabah in a Traditional Viewpoint 4
2.1 Traditional Mudarabah; an Overview 4
2.2 Business Issues in the Traditional Mudarabah 5
3 Introduction to the Joint Mudarabah (Mudarabah Mushtarakah) 6
3.1 The Joint Mudarabah (Mudarabah Mushtarakah) Concept 6
3.2 Main Features of the Mudarib Mushtarak 8
3.2.1 The Conditions Issue 8
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A bank, as what is basically known, is a financial institution and a financial intermediary that accepts deposits and channels those deposits into lending activities. Deposits and investments from depositors and investors, subsequently, are the main sources of funds for conventional banks or Islamic banks. So, IBF use mudarabah, regardless is it an investing or a financing account, as an alternative for conventional deposits and investment account, which are interest-based accounts.
This paper aims to shed some lights on the nature of mudarabah as a traditional viewpoint and suggests new model or form for mudarabah, which is called joint mudarabah (mudarabah mushtarakah). This mudarabah mushtarakah as a financial product leads to skip or mitigate that current finance and accounting issues related to mudarabah in a traditional viewpoint.
Therefore, this paper introduces three main parts. First part is an overview of a traditional mudarabah concept, and how it is failed in some current accounting and finance issues. An introduction to the new form of mudarabah which is mudarabah mushtarakah, and show the main features of mudarabah mushtarakah are a second part. Finally, how mudarabah mushtarakah solve the current accounting and finance issues on traditional mudarabah, and how it becomes more compliance with current investment’s requirement.
Mudarabah in a Traditional Viewpoint
Traditional Mudarabah; an Overview
Mudarabah is a special kind of partnership where one partner who owns capital (rabb-ul-maal) gives a specific amount of capital to another partner (mudarib) for investing it in that field he is skilled. The profit from this partnership is shared between capital provider (rabb-ul-maal) and entrepreneur (mudarib), in case of loss; however, capital provider will entirely bear these losses, while entrepreneur will suffers the fruitless effort. Any negligence or breach of the terms of mudarabah contract, the entrepreneur becomes responsible for these losses (Abdul Rahman, 2012, p. 76).
Mudarabah meets the interest of both parties, in which the rabb-ul-maal has capital but doesn’t have enough time or experience or skills to invest this money, and the mudarib has experience in businesses but doesn’t have the capital. Therefore their interests will be met in mudarabah.
The rabb-ul-maal may specify a particular business for the mudarib, in which case he shall invest the money in that particular business only. This is called restricted mudarabah (al-mudarabah al-muqayyadah). But if he has left it open for the mudarib to undertake whatever business he wishes, the mudarib shall be authorized to invest the money in any business he deems fit. This type of mudarabah is called unrestricted mudarabah (al-mudarabah al-mutlaqah) (Usmani, 2004, p. 32).
Business Issues in the Traditional Mudarabah
Mudarabah contract, as what mentioned above, is one of financial tools which are accepted by shari’ah as a tool to invest the money. Therefore, the...