How the jurists solve partnership problem in the agricultural activities??
Crafting
agricultural product and loss sharing (aPLS) in the place of profit and loss
for Islamic agricultural finance.
First and foremost, this article
which was written by Muhammad Hakimi Bin Mohd Shafiai discussed about the
principles used in financing the agricultural industries according to the
Islamic jurisprudence. Consequently, in order to solve the riba-based
financial issues, partnership contract is commonly introduced and used by the
jurists as it proposed an equitable risks and profits sharing. In addition,
partnership contract is based on some principle such as mudharabah, musharakah
and etc.
The author focussed on al-mudaraba,
al-musharaka, al-muzara’a and al-musaqa concept with a brief
explanation on the definition and practices in economy activities based on
Islam. Furthermore, we will be exposed on a several example of partnership
contract implemented on agricultural activities and some of inappropriate
practices by financial institutions on this issue.
Firstly, al-mudaraba is
defined as a contract between a contracting parties comprised of the capital
provider (rab al-mal) and the entrepreneur (mudharib) to run the
capital in order to generate profit. Meanwhile, al-musharaka in
definition is a contract between two or more parties on a mutual agreement
whereby the capital were contributed by all parties and they will share the
profit and losses occurred. Therefore, al-mudaraba contract is a profit
sharing agreement and al-musharaka contract is a joint-venture between
both the capital owner and the entrepreneur.
Furthermore, the jurist opinions
were varied in determining the type of capital contributable by the investors
or rab al-mal. Some opinion argued that capital can be either in the monetary
or assets form as stated by Akhtar (1993) and Siddiqi (1973).
However, based on the jurist consensus, it is agreed that the capital
contributed in partnership must be in the liquid form or monetary unit to avoid
any dispute and conflict when the profit were distributed.
Since this two contracts were seem
very similar, it were defined as the profit-sharing contract in Islam and both
parties will also share the losses inquired too. The difference between both
contracts is the capital owner in al-mudaraba contract, will suffer the
loss of his capital or money invested but not in al-musharaka contract
since the profit/losses will bear by all parties. Thus, these principles are
often put together known as Profit and Loss Sharing (PLS) scheme by the Islamic
financial institution practitioner.
Next, the author also discussed
about the contract of al-muzara’a and al-musaqa used as a
partnership contract specifically on agriculture. Originally this principle was
not clearly stated in Quran and Sunnah but the jurists deduced this
principle from history of khaybar with a certain condition to make it
valid.
Majalla defined al-muzara’a
contract as an agreement between the landowner and the farmer whereby the
landlord give his land for the cultivation and share the crops. Contemporary
jurist defined it as a joint-venture or partnership in farming whereby two or
more person invest in an agricultural activities. Meanwhile, al-musaqa
is an agreement between the owner of some tree and the farmer who will take care
of it that the fruit will be shared as agreed (Majalla). In other words,
it is contract of someone who owned a fruit-bearing tree with an individual who
is assigned to tend the tree and the harvested fruit will be divided among
them.
The capital in these contracts was
debated among the jurists on the basis of either land and seed are considered
as the capital from a landowner or not. Some jurists oppose land as a capital
since there were no loss will happen on land and it cannot be used in the
entitlement of profit. Most of them agreed that land as a form of capital by
arguing that it is similar with the capital in al-mudaraba contract. In
short, land is regarded as a factor that enables the production and it is can
be utilized for production in the same way as money.
Moreover, in order to understand the practice of al-muzara’a
and al-musaqa in partnership, it is called as agriculture Product and
Loss Sharing (aPLS) and differed with the Profit and Loss Sharing (PLS). This
is because al-muzara’a and al-musaqa has a classical form of
sharing which is sharecropping or output sharing instead of a profit-sharing
mechanism imposed on al-mudaraba and al-musharaka. Most of the
classic and modern jurists agreed that the common aspect of profit-sharing in al-muzara’a
and al-musaqa is the output is share and somehow, a limited flexibility
in distributing the expenses.
In addition, the jurists also has list a few salient feature of al-muzara’a
and al-musaqa to be recognised as a partnership contract as:
1.
Sharing of inputs of production
2.
Sharing the profit or loss
3.
No stipulated amount of returns
4.
A partner
relationship; not a debtor and creditor
Despite of the many principles introduced by the jurists, the
application should be emphasized in order to achieve the objectives to make
sure the transaction is according to the Islamic laws. Every contract developed
in Islamic economics has a specifics purpose to avoid interest-based
transaction especially in activities related to Islamic bank and finance
institutions. One of inaccurate practices of a contract is the uses of al-musharaka
contract in the agricultural activities.
An example of inaccurate implementation is to combine the al-musharaka
and al-musaqa into a single scheme in agriculture. This scheme allow the
bank to provide most of the agricultural input meanwhile the farmers will
contribute their efforts or labours and the operating expenses incurred will be
shared between them. Al-musaqa was applied to the farmers in providing
the equipment involved in cultivating the agricultural land. The other
inaccurate practices is to understand that al-musharaka concept is a
universal principle applicable in all types of transaction.
Based on the precise researches done by the jurists on the
partnership contract of agriculture land some would agree that al-muzara’a
and al-musaqa are more suitable for sharecropping but some of them were
opposed in this. By claiming that both concept is similar to the concept of
sharecropping and in line with the fundamental aspect of agricultural
partnership on sharing the crops rather than the profits. For instance,
according to some scholars the sharecropping is quite similar to the profit
sharing and loss in a trading activities has sum up to the contrary opinion which
is al-mudaraba and al-musharaka are also relevant in making an
agriculture partnership agreement.
In conclusion, there are a few scheme proposed by the jurist in
practicing the agriculture product and loss sharing (aPLS) by the financial
institution. Based on the contract suggested by Abu Yusuf, the first scheme is
the landowner will provide the agriculture input which are the land, seeds,
tools and animals while farmers are responsible in contributing their efforts.
Second, only the land was provided by the landowner and the rest will be
undertaken by the farmers including the tools and machineries. Third, the
landowner need to provide the land and seeds as the farmers will take care the
rest of the process.
Lastly, the agriculture Product and Loss Sharing (aPLS) is
different with the Profit and Loss Sharing (PLS) in the terms of the nature of
the transaction and the implementations. It is completely clear that al-muzara’a
and al-musaqa are based on sharing the crop instead of the profit sharing
which is more relevant to the trading activities.
For a better understanding and further explaination, you are invited to raed the article on:
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