REVISITING THE SHARĪʿAH RULING OF CAPITAL GUARANTEE IN A MUḌĀRABAH CONTRACT

Muḍārabah is a form of partnership contract based upon the spirit of profit sharing. It is widely applied in Islamic deposit products as it does not face any Sharīʿah issues compared to other Sharīʿah contracts used in Islamic deposit products such as qarḍ and wadīʿah. For example, qard-based Islamic deposit products involve the giving away of hibah to account holders, which may be tantamount to ribā once it becomes a norm among Islamic banks. However, qard/wadi ah is the best contract for those who have the sole objective of safe keeping when they deposit their money with a bank. In contrast, the mudarabah contract is lacking in terms of guarantee of the principal. This is because the mudārabah contract involves specific legal rulings that need to be complied with to ensure that its objective is realised. One of its essential rulings, as agreed by the overwhelming majority of eminent jurists, is that no stipulation of capital guarantee is allowed in a mudārabah contract, as this may violate its essence and basic principles. However, some scholars did permit stipulation of a capital guarantee on the mudärib that would bind the mudarib to guarantee the capital in the event of loss. It is worth noting that the binding effect of the capital guarantee can also arise from a benevolent guarantee of capital by the mudarib out of his freewill and eagerness to undertake a good deed (ma’ruf). In this regard, the majority of scholars agree that it is permissible after the mudārib has begun the mudarabah project. They hold differing opinions in case the mudarib benevolently guarantees the principal during the contract session before commencing the mudārabah project.

In view of the above, this research revisits the Shari’ah ruling on capital guarantee in a mudārabah contract with special emphasis on a binding capital guarantee by the mudārib resulting from his benevolence and freewill. This is because it is found in this study that the juristic texts generally prohibit capital guarantee in a mudārabah contract if it is stipulated by the rabb al-māl. This study preliminarily establishes that the ruling should be different if the mudarib himself volunteers to guarantee it in the event of loss, even if it results in a similar binding effect that holds the mudarib liable to guarantee the capital. The next issue dealt with in this study is whether or not the Shari’ah allows the abovementioned benevolent guarantee of capital to be included in a particular mudārabah agreement, as that is also tantamount to a binding capital guarantee on the mudarib. The question that arises is whether it is similar to the binding stipulation of capital guarantee by the rabb al-mal, which would require that it be prohibited according to the majority view.