Musyarakah: Definition, Benefits, Types, Pillars, and Conditions

What is Musyarakah? You must be familiar with this term if you have known the Islamic banking system for a long time. An explanation of what musyarakah is can be understood as one of the sharia banking contracts. Islamic banks offer banking products to their customers.

What distinguishes Islamic banking from banking in general is that all Islamic banking products comply with sharia or sharia principles. So what is Musyarakah, one of the 9 Islamic banking contracts? According to the Financial Services Authority (OJK), several Islamic banking contracts include Wadiah, Mudharabah, Musyarakah, Murabahah, Salam, Istisna', Ijarah, Ijarah Muntakiyah Bit Tamlik and Qardh.

This article discusses various things about what Musyarakah is. Please watch it to the end!

What is Musyarakah?

Musyarakah issued by the OJK, namely Musyarakah, is the definition of an Islamic banking financial product based on the principle of profit sharing in the form of raising capital from the parties with the aim of owning and then managing certain assets, companies or projects. Based on withdrawal and profit sharing in accordance with the profit sharing agreed in the contract.

Musyarakah or Syirkah can be interpreted as a cooperative agreement between two or more parties to achieve a certain goal. In business, the goal is to make a profit from a joint venture.

More specifically Musyarakah is when two or more parties (including banks and financial institutions and their customers) can raise capital and then merge corporations as legal entities. Each party that participates in musyarakah activities has a proportional share in accordance with the equity participation and has the right to control the company in accordance with their respective shares (voting rights).

In the world of banking, musyarakah is a cooperation agreement between a bank and its customers in financing a business, with provisions for sharing profits and risks according to an agreement.

Musyarakah type

In its application, Musyarakah is further divided into four types. The types of musyarakah described in “Sharia Banking from Theory to Practice” by Muhammad Syafi'i Antonio are as follows.

1. Syirkah Al-inan

Syirkah al-Inan is a contract between two or more people. Each party contributes a part of the total funds and participates in the work.

Both parties share profits and losses according to the agreement. However, the share of both parties, whether in finance, employment or profit sharing, does not have to be the same and identical according to their agreement.

2. Syirka Mufawadah

This type of musyarakah is a cooperative agreement between two or more people. Each party contributes a part of the total fund and participates in the work. Thus both parties share profits and losses equally.

3. Syirkah A'maal

Syirkah A'maal is a cooperation agreement between two people of the same profession, where the work is shared and the benefits of the work are shared. For example, the collaboration of two architects in an office building project.

4. Syirkah Wujuh

The next type of Musyarakah is Syirkah Wujuh. Syirkah wujuh is a contract between two or more people who are reputable and authorized who are experts in their fields. Syirkah Wujuh practitioners buy goods from shops on credit and then sell the goods in cash. In addition, profits and losses are shared based on guarantees given by each partner to suppliers.

Musyarakah Pillars

According to the Standard Musyarakah Agreement Contract, the pillars and conditions for a valid Musyarakah contract include:

• subject of contract (aqid)

• project or business (masyru')

• capital (ra'sul mal),

• agreement (sighatul contract)

• profit sharing ratio (nishbatu ribhin)

Musyarakah conditions

1. Something related to all forms of musyarakah, both property and others. In this case there are two conditions, namely:

• Those interested in property must be accepted as representatives

• What is pleasing about profits, namely the distribution of profits must be clear and known to both parties, for example half, third, etc.

2. Something related to musyarakah mal (wealth), in this case there are things that must be fulfilled, namely:

• Capital subject to Musyarakah agreements comes from payments (nuqud) such as junaih, riyals and rupiah

• What is used as capital (capital) exists when the musyarakah contract is made, regardless of whether the amount is the same or different.

3. Something related to Mufawadah business is required:

• Capital (principal assets) of Mufawadhah Syirkah must be the same,

• For those who are experts in kafalah

• General syirkah is required from those who are the subject of the contract ie in any kind of buying, selling or business.

Well, that's a summary of musyarakah. So, now you understand what musyarakah is, right?