Common management of investment capital from different investors in Mudarabah: scope of validity and consequences in Islamic law

Sadique, Muhammad Abdurrahman (2013) Common management of investment capital from different investors in Mudarabah: scope of validity and consequences in Islamic law. International Journal of Business, Economics and Law, 3 (3). pp. 38-45. ISSN 2289-1552

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Abstract

Elements of both mudārabah (fund management) as well as shirkah (partnership) in Islamic law are reflected in the operation of investment accounts offered by Islamic financial institutions. A number of partners pooling their funds together for running a business operation is possible under shirkah. Similarly, mixing mudārabah capital with funds of the mudārib (entrepreneur/fund manager) could be valid according to the majority of schools with express permission from the investor. In mudārabah, the schools of Islamic law have recognized the validity of several parties jointly investing funds with a common mudārib through a single contract. Such investment should take place jointly on a single occasion, so that the tenure of mudārabah could commence with regard to all capitals at the same time. Where the mudārib accepts investments from different individuals through individual contracts, the majority of schools require that the business of each capital be managed separately. This restriction is due to fundamental anomalies that may result from mixing different capitals, which, having mobilized in business separately, could be at different stages of profit or loss. However, jurists of the Hanafi school appear to have allowed the mudārib to mix funds of different investors together with their permission. This could possibly indicate permissibility of mixing funds invested at different stages when overall permission had been obtained. The procedure adopted in this regard in the investment accounts run by Islamic banks requires further research and scrutiny.

Item Type:	Article (Journal)
Additional Information:	5640/34064
Uncontrolled Keywords:	mudarabah, capital, investment, accounts, investors, Islamic
Subjects:	H Social Sciences > HG Finance > HG1501 Banking H Social Sciences > HG Finance > HG4001 Financial management. Business finance. Corporation finance. K Law > KBP Islamic Law > KBP1 Islamic law.Shariah.Fiqh > KBP490 Furūʻ al-fiqh. Substantive law. Branches of law. K Law > KBP Islamic Law > KBP1 Islamic law.Shariah.Fiqh > KBP490 Furūʻ al-fiqh. Substantive law. Branches of law. > KBP639 Muʻāmalāt
Kulliyyahs/Centres/Divisions/Institutes (Can select more than one option. Press CONTROL button):	Ahmad Ibrahim Kulliyyah of Laws > Department of Islamic Law
Depositing User:	Dr Muhammad Abdurrahman Sadique
Date Deposited:	13 Jan 2014 09:22
Last Modified:	27 Apr 2015 08:35
URI:	http://irep.iium.edu.my/id/eprint/34064

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