Mudaraba and Musharaka transactions
Assalamu alaikim Mufti Saheb,
I pray this email finds you in good health.
My question is related to business transactions.
1. There are 3 parties in this transaction. Person A is the seller, B is the buyer. C is an intermediate.B intends to buy some goods from A, but he does not have money to buy it. He asks C to buy it from A for a certain amount(say 50 INR or whatever the amount A offers it). Then C sells it to B for a higher amount(say 75 INR or the amount is negotiated) on a credit basis. Then B sells it to someone else for whatever amount he wishes and settles his credit to C at a later date as agreed.
2. Person A and B intend to do business together. A is the investor and B is the working partner.There are two scenarios here:
- a) A is ONLY an investor as in mudarabah contract, whole responsibility lies on B.
- b) A is an investor and also a working partner who takes care of selling while B is in the purchasing department.
In both the scenarios, A does not feel secure as he ALONE has to bear the loss ( Here I am refering to the loss which happens due to natural occurences or price drops,not due to the negligence/carelessness of B.
To solve this, A offers half of the capital as credit to B and puts a condition that he invests this money ONLY in their business and B whole heartedly agrees as he does not want to put the whole burden of loss into A. This way, if any loss occurs both parties share it proportionately.
Are the above transactions permissible? Are there any restrictions/conditions to carry out these transactions? If impermissible, Please suggest alternative shar’ee solutions to above problems.
May ALLAH reward you abundantly for your services.
In the Name of Allah, the Most Gracious, the Most Merciful.
As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.
- If C purchases the item from A for Rs50 and after having taken physical possession of the item, he sells it to B for Rs75 on credit, that is permissible on condition the repayment schedule is stipulated. Once B takes possession of the item, he may sell the item to someone else for example to D for a higher price. If it is cash, then the price must be stipulated. If it is credit, the final price must be stipulated and the payment schedule must also be stipulated.
- A is afraid to enter into a Mudarabah as he will have to bear the loss as a financer. He wishes to make the venture a Musharakah. For that he loans B money to contribute to the partnership. If B voluntarily contributes to the partnership, that will now be a Musharakah partnership and it will be valid. The loan is given by A to facilitate B to create a Musharakah partnership.
And Allah Ta’āla Knows Best
Student Darul Iftaa
Checked and Approved by,
Mufti Ebrahim Desai.
P.S. B must take possession of the loan from A before voluntarily contributing to the Musharakah partnership. B cannot enter the partnership by virtue of merely being a debtor to the partnership.
 Islamic finance – Mufti Taqi Usmani