Mushārakah—A Realistic Approach to the Concept in Islamic Finance and its Application to the Agricultural Sector in Pakistan

in Arab Law Quarterly
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Food is one of the basic necessities that is imperative for human survival. The majority of farmers related to agriculture belong to the lower class and are hence not in a position to fulfil their agricultural needs. Therefore, they must borrow from various sources, e.g., from individuals, organizations, and/or banks, using interest-based lending, which Muslims are prohibited from doing according to the Sharīʿah. Here the concept of mushārakah (participatory mode of finance) is the best option. The present work discusses the application of such transactions to overcome farmers’ financial problems. In this article, the concept of mushārakah is first elaborated in light of classical/contemporary Islamic law literature referring to its rules and regulations followed by a discussion on how mushārakah can be effectively applied to the agricultural sector. The concepts of muzāraʿah (temporary sharecropping contract), musāqah, diminishing mushārakah (al-mushārakah al-mutanāqisah), and customer agency are critically analyzed in such away to make these fit and viable for farmers and Islamic financial institutions.

Mushārakah—A Realistic Approach to the Concept in Islamic Finance and its Application to the Agricultural Sector in Pakistan

in Arab Law Quarterly




Ibid. p. 299.


Ibid. pp. 299-300.


Muhammad A. GulaidFinancing Agriculture Through Islamic Modes And Instrument: Practical Scenario and Applicability (Jeddah: Islamic Research And Training Institute, Islamic Development Bank1995) Research Paper No. 34 p. 50; (accessed: 16 May 2011).


Ibid. p. 4.


Magda Ismail Abdel Mohsin“The Practice Of Islamic Banking System In Sudan”Journal of Economic Cooperation26/4 (2005): 27-50; (accessed: 13 July 2012).


Adam B. ElheraikaOn the Experience of Islamic Agricultural Finance in Sudan: Challenges and Sustainability (Jeddah: Islamic Research and Training Institute Islamic Development Bank2003) 74 pp. Reviewed by Aḥmed S. Bamakhramah Faculty of Economics and Administration Department of Economics King Abdulaziz University Jeddah Saudi Arabia; 08.pdf (accessed: 13 July 2012). See also Adam B. Elhiraika “Risk-Sharing and the Supply of Agricultural Credit: A Case Study of Islamic Finance in Sudan’ Journal of Agricultural Economics 47/1-4 (1996): 390-402; 402.html (accessed: 13 July 2012).


Ali Yasseri“The Experience of the Islamic Republic of Iran in Mushārakah Financing”Arab Law Quarterly 14/3 (1999): 231-224; (accessed: 7 July 2012).


Saeed Yazdani“An evaluation of agricultural credit system in Iran”Giordano Dell-Amore Foundation Savings and Development29/2 (2005); 117-132; (accessed: 7 July 2012).


Seesupra note 36 at 231-224; (accessed: 7 July 2012).


Ibid. p. 3878.


Al-Murginanīsupra note 21 at Vol. 4 p. 378.


Mohammad Nejatullah SiddiqiPartnership and Profit-Sharing in Islamic Law (Leicester: The Islamic Foundation1985) pp. 22-23.


Al-Murginanīsupra note 21 at Vol. 4 p. 378.


Ibid. p. 10.


Al-Murginanīsupra note 21 at Vol. 7 p. 99.


Ibid. p. 439.


Ibid. p. 5.


Ibid. p. 6.


Ibid. p. 76.


Ibid. p. 7.


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