Monday, August 15, 2005


Partnership is considered to be the appropriate mode for collective investment in modern economic life. The Islamic banks use partnership by contributing capital to new or established projects. They also bear part of the cost of the project equal to the ratios of their shares in capital.

The Islamic banks by using partnership as a mode of investment make sufficient liquidity available to the customer in the long run. The Islamic banks are usually active partners, they participate in determining the methods of production and the objectives of the establishment. They also supervise and follow up the performance of the establishment. The Islamic banks share profit or loss with the (partners) customer without burdening the customer with debt and financial liabilities which it has to pay in all circumstances.

The decreasing partnership is suitable for the finance of industrial establishments, farms, hospitals and every project capable of producing regular income.

Nowadays it is considered to be the appropriate mode to finance collective investment.

As regards the bank it earns periodical profit all the year round.

As regards the partner, it encourages the partner to participate in Halal investment. It realizes the customer's ambition to individually own the project in the short run when the bank withdraws gradually.

As regards the society, it corrects the course of the economy by developing the mode of positive partnership instead of the negative relationship of indebtedness, by doing so it achieves equity in distributing the results.


....Truly many are the partners (in business) who wrong each other: Not so do those who believe And work deeds of righteousness.

Saae 24
The Holy Hadith:

I am the third partner to the two partners unless either of them betrays his friend. If either betrays his friend, I quit from betwixt them.

Related by Abu Daoud.

The Characteristic Traits of Modes of Partnership

The partnership operation means two or more parties draw a contract to work together by the capital they contribute in condition of dividing the accruing profit between them.

The most important traits of these operations are:

* The participation in capital whether it is an asset, labour or liability.
* The partnership in work, management and disposal where the right of ownership and disposal remains to each partners.
* The partnership in the results of the operations whether profit or loss.
* The continuity in the partnership, usually to long terms.

Divisions of the Modes of Partnership
Partnership operations embrace all kinds of contract companies which the Islamic Figh divides into three kinds:

Labour Company
it is a contract in accordance to which two or more parties agree on accepting to do a job (such as trade, construction, etc.) together and to divide the accruing profit among themselves in specific percentage.

Character Company
It is a contract in accordance to which two or more parties agree on purchasing with their characters and reputation goods and commodities on credit for trading in condition of distributing the accruing profit, or loss among themselves in ratios proportionate to what each one of them bears of the debt guarantee or security.

Asset Company
It is a contract in accordance to which two or more parties agree on participating in the contribution of capital for investment and the accruing profit shall be divided among themselves in specific percentages agreed upon and they bear losses in ratio proportionate to their (contributions) shares in capital. But, profit may be distributed separate from the debt guarantee borne by each, whereas loss shall be proportional to debt guarantee.

In Asset Companies
The two partners may be equal in capital and power of disposal, this sort of asset companies is called "Mufawada Company"

The two partners may neither be equal in capital nor in power of disposal. In other words, one of the partners has more capital than the other or one partner is responsible for the company and the other is not. This kind is called "Ainan company".

It is notable that the rein companies are the most appropriate companies for the business of the Islamic banks. The other kinds of companies rarely suite the nature of business in the Islamic banks. That is because the rein company enables the Islamic bank to contribute in established or proposed projects and to authorize the other partners in all the concerns of investment and the bank contents with the role of general supervision and follow up and the right to intrude when necessary.

The two modes of partnerships which are applied by the Islamic banks. They are:

* Permanent Partnership

* Decreasing Partnership

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