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Monday, March 24, 2008

Understanding More about Qirad...

Amongts the Fiqih Ulama, there are those who said that these two things are the same, but there are those who said that these two things are different. Those who said they are the same amongst others are lain Dr. Wahbah Al-Zuhayli in the book Al-Fiqh Al-Islami Wa-Adillatuh where he explained that Qirad and Mudarabah is just a matter of different wording from different area. The word Qirad is from Hijaz while Mudarabah is from Iraq.

Qirad emphasize on the capital loan aspect and the delivery of part of the profit for the lender, while Mudharabah emphasize on the profit sharing between the capital owner and the entrepreneur that receive the capital.

Consensus of the validity of Qirad Contract is based on ijma (consensus of opinion) amongst the Ulama referred to tradition of Disciples of Muhammad SAW. One of them is narrated by Malik in Al-Muwatta, that: “Abdullah and Ubaydillah, both are sons of Umar bin Khattab RA. When they were on the move with their troops in Iraq, they stopped by to meet Abu Musa Al-Ashary, which is one of Umar bin Khattab’s staff. He offered to support money to both, Abdullah and Ubaydah, and the money will be taken from the State Treasury as a loan, and they could use it for buying goods from Iraq and to be sold in Madinah, took the profit and pay back the nominal to their father. They did it as proposed by Abu Musa, and came to their father. But their father got very angry, then asked whether Abu Musa gave the same offer to their troops? They answered it no! He got angry and said: ”Both of you are the sons of Amirul Mukminin (Commander of the Faithful Muslims) so that Abu loaned you some money for getting a profit?” Then Ubaydilah answered, “Ya Amirul Mukminin, if we lost the money, sure we will guarantee” But Umar RA still doesn’t want that they take the profit. When Ubaydillah expressed the reason again, one of the presence audiences said, “Ya Amirul Mukminin, maybe you can treat as Qirad (that is giving the half profit to them and the other half to the State Treasury). Umar agreed with this rule.”

Hereon, I will use the terminology of Qirad more rather than Mudharabah because this Qirad is used often by Mazhab Syafi’i.
Qirad or Mudharabah will be the answer of the fair investment for the investors and the enterpreuners and also as an alternative from the usury system that the people should abandon.

The main conditions of Qirad or Mudharabah are:

1) The capital has to be in cash or non-cash like in the form of Dinar, Dirham or bank notes (there are some different opinions regarding cash or non-cash amongst the four mazhab. Imam Syafei’i is the only one that thinks it should be cash. But Imam Hanafi, Imam Malik and Imam Hambali have an opinion that the capital could be in the form of properties/goods which are non cash, but the one that count as capital is not the goods but the cash value of them.)

2) The amount of the capital is clear. So we can differentiate which is capital and which is profit.

3) Percentage of profit sharing should be clear between the investor and the entrepreneur. Qirad or Mudarabbah is invalid when one or both of the parties state a certain absolute amount (not percentage) for the profit sharing.

4). The entrepreneur is the receiver of Amanah, and obligated to keep the amanah, even though they don’t need to cover the losses if it’s not in purpose.

5)Qirad could be opened or limited in nature. Opened Qirad means that the kind of business, market, place etc is not limited. In limited Qirad, the business, market, place etc is subject to the investors’ agreement.

Financing through Qirad or Mudharabah will ease people who are honest, fair, careful and competent in certain business to receive amanah from the investors – and for that reason is not necessary to have material collateral. In contrary if people don’t have the character as mentioned above, is difficult to get a financial loan even though they have a lot of material collateral.

This Financial System shall create a business environment based on values that will develop good characters of the players. People who are not honest, not fair, not careful and not competent will automatically be left out from this kind of business environment. The business world will be dominated by honest, fair, careful and high competence people. This generation of entrepreneurs’ will prosper the Moslem people as a whole and will bring back the glory of Islam at the right time.

I-Qirad : Just Financing We developed this theory and basic law of Qirad’s product in Gerai Dinar. To be more impressive in this era of information the Qirad’s product is called I-Qirad; which InsyaAllah if it grows widely in global market shall have a separate domain that is www.i-qirad.com for the samples of application I will write it soon in my next article.



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