We are on the subject of Musharakah or partnership/joint venture and so far I have taken you all on a captivating journey of various offshoots of the Musharakah proposition. Last week, you learned that there can also be an equity-less Musharakah, ie without contributing a penny toward the Musharakah capital. This is the Musharakah Wujuh or credit partnership.
Today, I shall explain to you another penniless Musharakah which is called Musharakah Amal or labor partnership. This type of partnership is also referred to as the service, professional or vocational partnership. Nevertheless, in a nutshell, it is grouping of skilled labor to undertake a job collectively and to share the revenue in an agreed fashion.
The following activities come to mind when I think of Musharakah Amal:
a. Harvesting of crops
b. Painting of buildings
c. Repairing of houses, and
d. Clearing up and development of land, etc.
The research on some of the archaic scholars such as those belonging to the Shafi’i and Imami schools of thought reveal that they did not approve of the labor partnership in the Islamic jurisprudence owing to the non-availability of capital which they considered as the mainstay of a Musharakah arrangement. That view is in contrast with the Hanafi, Hanbali and Maliki schools of thought which allow Musharakah Amal albeit with minor differences such as it should be among the workers having the same skill set, etc. Anyway, the reality is that such Musharakah activity is widely seen around us among masons, carpenters and those mentioned previously besides the other skills.
What are the basic requirements of forming such partnerships? Well, contrary to the Musharakah Inan and Musharakah Mufawadah, and somewhat similar to Musharakah Wujuh (explained last week), the absence of the requirement to chip in with monetary capital makes it fairly straightforward for the interested persons to form Musharakah Amal.
Although encouraged to do so by Shariah discipline, I personally doubt very much if the partners in Musharakah Amal shall be bothered to draw a formal memorandum of association or a partnership agreement and act accordingly. Most of the time, the Musharakah Amal takes place spontaneously and verbally between the skilled persons who work on an assignment-by-assignment basis as they form a strong bond and prefer to work together. There is a great degree of sincerity and honesty found among such groups since the partners rely on each other toward the satisfactory completion of the job.
The activities of the Musharakah Amal must be in compliance with Shariah principles and as such, picking the grapes at the vineyard for a brewery shall be a no-go area. Similarly, the collection of interest on loans for lenders or raising pigs in a farm for meat cannot be permitted as Musharakah Amal activities.
How about the sharing of revenue? This should be either equal if all partners enjoy a similar skill set, or as agreed in case of disparity in the competence of the partners whereby a couple of them may be veteran workers while others are not as seasoned.
Notice that I used the term revenue, instead of profit here. Why? Simply because the term profit denotes that there must have been a gross earning and the distributable profit has been ascertained after taking out selling, general, administrative and depreciation or amortization expenses which is a norm in Musharakah Inan and Mufawadah but not in Musharakah Amal.
There could be a situation that one of the partners own certain equipment needed to undertake the assignment, for example, a tractor which is used in harvesting the crops. The Shariah position here is that either such a partner be accorded a higher percentage when sharing the revenue or the Musharakah Amal should pay the rent for hiring the tractor from the partner.
There is no formal liquidation required in Musharakah Amal which comes to an end when the task is completed and the revenue distributed and they depart, until such time that they meet again for a new assignment when they form a new Musharakah Amal.
The partners in Musharakah Amal share the liability equally. In other words, if there is non-performance due to any reason leading to the partnership incurring certain liabilities (such as a third-party liability), this will be equally shared by the partners. Nevertheless, if the liability was brought on to the Musharakah Amal due to a partner’s negligence, it shall be his responsibility to solely bear the same and fairly compensate the other partners if they have already recompensed the employer.
The sharing of liability equally in Musharakah Amal makes it similar to Musharakah Mufawadah where all partners are guarantors for each other. Nonetheless, if a partner takes a loan without seeking concurrence from the others, they will not be responsible for the repayment of the loan.
What could be the situations of losses in Musharakah Amal? Well, the first incident which comes to mind is that they are not paid the amount agreed by the employer. In such a situation, it will not be correct to state that the Musharakah Amal suffered a monetary loss since there was no initial capital invested which may have been dented. Thus, the best thing the partners should do is to forgo the treachery of the employer and move on to find a new assignment without further waste of time.
The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions of the Dubai Islamic Economy Development Centre, nor the official policy or position of the government of the UAE or any of its entities. The purpose of this article is not to hurt any religious sentiments either consciously or even unwittingly.
Sohail Zubairi is the senior advisor with the Dubai Islamic Economy Development Centre. He can be contacted at [email protected].
Next Week: Explanation on other forms of Musharakah in the modern world.