Islamic Economic

Murabahah

Murabahah is the Islamic version of a just or equal profit where no one is hurt nor damaged during business transactions. It is one of the alternatives for a just monetary system. Murabahah is a cost-plus contract in which a client, wishing to purchase equipment or goods, requests the Islamic bank to purchase the Items and sell them to him at a cost plus declared profit. By this technique a party needing finance to purchase ceratain goods gets the necessary finance on a deferred payment basis. The finance provider does the purchasing of the required goods and sells them on the basis of a fixed mark-up profit, agreeing to defer the receipt of the value of the goods even though the goods can be delivered immediately. The need for finance of the one in need is thus met.

This financing technique is sometimes considered to be the same as interest, however, in theory, the mark-up is not in the nature of a compensation for the time or deferred payment, even though the entire cost had to be incurred because the needy person did nt have at hand to make the purchase he wanted. Rather, the mark-up is for the service that the finance-owner provides, namely, seeking out and locating and purchasing the required goods at the best price.

PERBANDINGAN KINERJA BANK ISLAM TERHADAP BANK PERSERO, BANK ASING DAN BANK UMUM DI INDONESIA 

The study evaluates interbank performance of Islamic Banks in Indonesia on profitability, liquidity, risk and solvency; and community involvement for the period 2000 – 2004. Financial ratios are applied in measuring these performances. F-test are used in determining their significance. The study found that Islamic Banks are relatively more commitment to community development, but less liquid compared to the Government Banks, Foreign Banks, and Commercial Banks. Islamic Banks do not show (statistically) any difference in performance and managerial performance with the Government Banks and Commercial Banks, but Islamic Banks are less performance and managerial performance with the Foreign Banks. Islamic Banks are relatively more cost efficient compared to the Government Banks and Commercial Banks; more profit (NIM) compared to the Commercial Banks; and relatively less risky compared to the Foreign Banks. 

MUSHARAKAH FINANCING MODEL

Introduction

In the contemporary world there is always a dilemma for the entrepreneur who has a promising idea for a new venture. How is he to raise the capital necessary to launch the venture? Borrowing the money is probably out of question. If the normal interest rate is 6% but the venture has a 10% chance of failing within a year, the lender will probably charge interest at a rate of 16%. High interest, plus amortization, will impose heavy fixed costs on the venture from the outset and this will increase the danger of failure, and in turn the interest rate. Moreover, if the venture's prospects can not be predicted with reasonable confidence, it will be very difficult even to calculate an appropriate interest rate. The alternative must be for the entrepreneur to admit a partner to the business who is entitled to receive a portion of profits from the venture, if any, in exchange for contributing the necessary capital to it. The partner's compensation is determined automatically by the fortunes of the business. There is no need to compute an interest rate and there are no fixed costs of debt, the partner will receive his profits only if and as earned. 

However, Islam aims at establishing a social order where all individuals are united by bonds of brotherhood and affection like members of one single family. This brotherhood is universal and not parochial. It is not bound by any geographical boundaries and encompasses the whole of mankind and not anyone family group, tribe or race. 

The purpose of this chapter is to thoroughly examine the framework for musharakah (equity participation) and other financial instruments of the Islamic banks. The chapter is divided into eight sections. The first will define musharakah and give its historical background while in the second the different types of musharakah will be identified. The third will deal with the conditions of present day musharakah and the fourth analyses equity financing and its channels of investment in an Islamic society. The fifth will identify the steps to be taken to transfer to an equity financing system and the sixth is concerned with the role of equity financing in mobilizing funds and stabilization of the system. The seventh section describes other financial instruments of Islamic banks. Additional subsections are included which examine ijara (leasing), murabaha (cost plus financing), qard al-hasanah (beneficence loans), bai muajjal (deferred payment sale), bai salam (purchase with deferred delivery) and tadamun (solidarity). Finally some conclusions are drawn. 

The concept of brotherhood and equal treatment of all individuals in society and before the law is not meaningful unless accompanied by economic justice such that everyone gets his due for his contribution to society or to the social product and that there is no exploitation of one individual by another. The Prophet aptly warned: "Beware of injustice for injustice will be equivalent to darkness on the Day of judgement". This warning against injustice and exploitation is designed to protect the rights of all individuals in a society (whether consumers or producers and distributors, and whether employers or employees) and to promote general welfare, the ultimate goal of Islam. 

Of special significance here is the relationship between the employer and the employee which Islam places in a proper setting and specifies norms for the mutual treatment of both so as to establish justice between them. An employee is entitled to a "just" wage for his contribution to output and it is unlawful for the employer to exploit his employee. 

1. Definition of Musharakah & Its Historical Background 

Musharakah or shirkah can be defined as a form of partnership where two or more persons combine either their capital or labour together, to share the profits, enjoying similar rights and liabilities. 

From the very inception of human society, the methods to meet day to day needs have been changing with the change of social, economic, scientific, cultural and political circumstances, especially habits, fashions and the standard of living. These methods regulate the commercial activities and vary from place to place and time to time. The Arab society at the time of the rise of Islam had very simple financing methods and forms of business peculiar to that society. 

The advent of the Holy Prophet saw the practice of musharakah already prevailing over the commercial activities in Arabia. He not only ratified it, but also himself did business on the basis of musharakah.1 

After Hijra, the muhajireen and the ansar were declared by the Prophet to be brothers. Subsequently they joined as partners, in the form of musharakah, muzara and musaqat, in their trade and commerce. The nature of the transaction, in the different forms, is identical. The different nomenclature in Arabic refers to diverse activities such as muzara in agriculture, musaqat in gardening and musharakah in trade. The musharakah of capital and labour is called mudarabah. These four forms were so developed that they became independent institutions and the jurists formed detailed rules about them. There is a consensus of opinion among the jurists of all schools- of thought (including Hanfia, Maleki, Shafei, Hanbali and Shia) that musharakah is a valid and legitimate contract in Islam. The jurists, however differ over its form conditions and other details. 

2. Types of Musharakah 

Originally musharakah or shirkah (Partnership) was of two types. namely, 

(a) Shirkah al-milk (non-contractual partnership) 

(b) Shirkah al-uqood (contractual partnership) 

Shirkah al-milk (non-contractual) implies co-ownership and comes into existence when two or more persons happen to get joint-ownership of some asset without having entered into a formal partnership agreement; for example, two persons receiving an inheritance or a gift of land or property which mayor may not be divisible. The partners have to share the gift. or inherited property or its income, in accordance with their share in it until they decide to divide it. If the property is divisible and the partners still decide to stick together, the shirkah al-milk is termed ikhtiyariyyah (voluntary). However, if it is indivisible and they are constrained to stay together, the shirkah al-milk is characterized as jabriyyah (involuntary). Shirkah al-uqood (contractual partnership) can, however, be considered a proper partnership because the parties concerned have willingly entered into a contractual agreement for joint investment and the sharing of profits and risks. The agreement need not necessarily be formal and written, it could be informal and oral. Just as in mudarabah, the profits can be shared in any equitably agreed proportion. Losses must, however, be shared in proportion to the capital contribution.  Shirkah al-uqood has been divided in the fiqh books into four kinds: al-mufawadah (full authority and obligation); al-inan (restricted authority and obligation); al-abdan (labour, skill and management); and al-wujuh (goodwill, credit-worthiness and contracts).  In the case of mufawadah the partners are adults, equal in their capital contribution, their ability to undertake responsibility and their share of profits and losses. They have full authority to act on behalf of the others and are jointly and severally responsible for the liabilities of their partnership business, provided that such liabilities have been incurred in the ordinary course of business. Thus each partner can act as an agent (wakil) for the partnership business and stand as surety or guarantor (kafil) for the other partners. Inan on the other hand implies that all partners need not be adults or have an equal share in the capital. They are not equally responsible for the management of the business. Accordingly their share in profits may be unequal, but this must be clearly specified in the partnership contract. Their share in losses would of course be in accordance with their capital contributions. Thus in shirkah al-inan the partners act as agents but not as sureties for their colleagues. Shirkah al-abdan is where the partners contribute their skills and efforts to the management of the business without contributing to the capital.  In shirkah al-wujuh the partners use their goodwill, their credit-worthiness and their contacts for promoting their business without contributing to the capital.2 Both these forms for partnership, where the partners do not contribute any capital, would remain confined essentially to small-scale businesses only.  These are of course models. In practice, however, the partt1ers may contribute not only finance but also labor, management and skills, and credit and goodwill, although not necessarily equally. 3. Types of Modern Musharakah and its Conditions The modern business concerns being run on the basis of musharakah (as defined above) are as under: 

1. Partnership: It is regulated by- 

(a) Partnership rules framed by the government, 

(b) Business practices prevailing in the business community. 

2. Limited company. This type of musharakah is strictly controlled by the statutory rules framed by the government Its commercial activities are, however, influenced by the business practices (urf).               

3. Co-operative societies. This musharakah is also governed by statutory rules. Its commercial activities are influenced by the practices prevailing in the business community. 

The above modern musharakah principally resembles shirkah al-inan. The details are, however, considerably different due to change of urf and other factors including modem commercial techniques, economic conditions and legal requirements. Let us discuss briefly the conditions of musharakah, which are those of shirkah al-inan. Other types of musharakah mentioned by jurists are nearly obsolete nowadays. 

Capital to be invested by the partners may be unequal. For the majority of the jurists the capital should be in the shape of currency and not in the shape of goods. The condition for capital to be in the form of currency only was imposed when it was difficult to refer to the goods in terms of currency. This was true in the days of barter systems when the jurists framed the rules, but now goods are generally referred or accounted for in terms of currency. This condition should, therefore, be waived. In limited companies and co-operative societies the capital is invested in the form of equal units of currency called shares and the intended partners buy as many shares as they wish. This practice has universally been accepted as urf and is therefore according to Islamic principles. _(dari berbagai sumber)