Notes
42 Mudârabah (commenda) refers to an agreement between two or more persons whereby one or more of them provide finance, while the others provide management. The purpose is to undertake trade, industry or service with the objective of earning profit. The profit may be shared by the financiers and the managers in any agreed proportion. The loss must, however be borne only by the financiers in proportion to their share in total capital. The loss of the manager lies in having no return for his/her effort.
43 Mushârakah (partnership): is also an agreement between two or more persons. However, unlike mudârabah, all of the partners contribute finance as well as entrepreneurship and management, though not necessarily equally. Their share in profits can be in accordance with the agreement but the share in losses must be in proportion to their share in capital.
44 According to the Shafiî school, even the profits should be divide into proportion to the capital contributions. This is because it is assumed that the contribution of skill and management is difficult to measure and that labour will be contributed equally. However, if two partners contribute to the capital and only one of them contributes to work then, even according to the Shafiî School, the working partners share in the profit may be higher.
45 Udovitch, 1970, pp.180 and 261.
46 Udovitch. 1981, p.257, see also p.268.
47 Goiten, 1967, pp.235 and 250 respectively. See also Goitein, 1966, pp. 271-274.
48 Schatzmiller, 1994, p.102
49 Fischel, 1992.
50 Dûrî, 1986, p.898.
51 Udovitch, 1981.
52 Dûri, 1986, p.898.
53 Udovitch, 1981.
54 Murabahah (also called bay’muájjal) refers to a sales agreement whereby the seller purchase the goods desired by the buyer and sells them at an agreed marked-up price, the payment being settled within a specified time frame, either installments or lump sum. The seller bears the risk for the goods until they have been delivered to the buyer.
55 Salam: refers to a sales agreement whereby full payment is made in advance against an obligation to deliver the specified fungible goods at an agreed future date. This is not the same as speculative forward sale because full, and not margin, payment is required. Under this arrangement the seller, say a farmer, may be able to secure the needed financing by making an advance sale of only a part of his expected output. This may not get him into delivery problems in case of a fall in output due to unforeseen circumstances.
56 Istisnâ’ refers to sales agreement whereby a manufacturer (contractor) agrees to produce (build) and deliver a certain good (or premise) at a given price at a given date in the future. This, like salam, is an exception to the general Shariah ruling which does not allow a person to sell what he does not own or possess. However, unlike salam (q.v.), the price need not be paid in advance. It may be paid installments in step with the preferences of the parties, or partly at the front end and the balance later as agreed.
57 For an elaboration of the nature and role of these institutions, see Chapra, 1985, pp.174-81.
58 Wohlers-Scharf, 1983, pp.11-12.