Musyarakah from the Perspective of Interpretation of the Qur'an, Hadith, and Fiqh: Theoretical and Practical Relevance in Modern Islamic Finance

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Jawa— Musyarakah in Modern Islamic Finance: Strong Scriptural Roots, But Still Limited in Banking Practice. The research conducted by Deni Permana (STIES Saleh Budiman), Moh Najib (UIN Sunan Gunung Djati), and Reni Farida Yanti (STIES Saleh Budiman), which was published in the International Journal of Management Analytics (IJMA), Vol. 4 No. 1, January 2026.

The research conducted by Deni Permana, Moh Najib, and Reni Farida Yanti concludes that the concept of musyarakah— a cooperation contract based on profit sharing and loss sharing—has so far been known as an “icon” of Islamic finance because it is considered to most reflect the principle of Islamic economic justice. However, in reality, this contract still remains a product with a relatively small portion in the financing portfolio of Islamic banks.

This research is important because it reveals one major fact: musyarakah has a very strong foundation in the Qur’an, hadith, and fiqh, but in modern banking practice, this contract is still considered “heavy” because it is risky, costly to supervise, and prone to moral hazard issues.

Musyarakah: The Partnership Contract Designed for Justice

In Islamic economic thought, musyarakah is a contract in which two or more parties contribute capital, labor, expertise, or other resources to run a joint business venture. Profits are distributed according to an agreed ratio, while losses must be borne in proportion to each party’s capital contribution.

Because it is built on risk sharing, musyarakah is widely seen as a contract that best represents the ethical mission of Islamic economics: fairness, accountability, and inclusive growth.

The authors argue that musyarakah is not simply a financial tool. It is also a moral and social instrument meant to strengthen trust-based cooperation, rather than creating a creditor–debtor relationship similar to conventional loans.

What the Authors Examined

Permana, Najib, and Yanti analyzed musyarakah through four major dimensions:

Qur’anic foundations (classical and contemporary tafsir)
Prophetic foundations (hadith and its historical context)
Classical fiqh constructions from the four Sunni schools
Modern Islamic finance practice, especially in Indonesia

What makes this study stand out is its integrated approach. It does not stop at religious theory, but compares Sharia ideals directly with the operational realities of Islamic banking.

Method: Combining Scripture, Jurisprudence, and Modern Regulation

The study uses a qualitative library research method.

Its primary sources include:

Classical Qur’anic commentaries such as al-Ṭabarī, Ibn Kathīr, al-Qurṭubī
Contemporary commentaries such as Tafsīr al-Munīr (Wahbah al-Zuḥaylī) and Tafsīr al-Mishbah (M. Quraish Shihab)
Major hadith collections including Ṣaḥīḥ al-Bukhārī, Ṣaḥīḥ Muslim, Sunan Abū Dāwud
Classical fiqh texts from all four Sunni schools
Modern frameworks and regulations such as:

DSN-MUI Fatwa No. 08/DSN-MUI/IV/2000
PSAK 106
AAOIFI Sharia Standards
OJK regulatory and statistical reports

The authors applied thematic content analysis and used maqāṣid al-sharī‘ah (objectives of Islamic law) as an evaluative lens.

Key Finding 1: The Qur’an Recognizes Partnerships—but Warns About Injustice

One of the most explicit Qur’anic verses linked to partnership ethics is Surah Ṣād (38):24, which states that many partners wrong one another, except those who believe and do righteous deeds.

The study cites major tafsir interpretations:

Al-Ṭabarī sees this verse as a general principle: partnerships are socially real but morally vulnerable.
Ibn Kathīr emphasizes the risk of betrayal, manipulation, and injustice in shared economic relationships.
Al-Qurṭubī links the verse to fiqh principles requiring fairness, clear consent, documentation, and dispute-resolution mechanisms.

In other words, the Qur’an does not only permit partnership contracts—it provides a strong ethical governance framework for them.

Key Finding 2: Hadith Places Honesty at the Center of Musyarakah

The study highlights a well-known hadith narrated by Abū Dāwud:

“Allah is with two partners as long as one of them does not betray the other.”

The authors interpret this not merely as moral advice but as a theological statement: divine blessing in business depends on trustworthiness.

They also stress the hadith prohibiting gharar (excessive uncertainty), which becomes a key operational rule for musyarakah. Capital contributions, profit ratios, business scope, responsibilities, and loss mechanisms must be clearly defined to avoid disputes.

Key Finding 3: The Four Sunni Schools Agree on Legitimacy, Differ on Flexibility

The research shows that all four major Sunni schools of law accept syirkah/musyarakah as a legitimate contract. However, they differ in how flexible they are about its forms:

The Hanafi school is the most flexible, accepting multiple partnership forms, including labor-based models.
The Maliki school is more cautious, especially when uncertainty could lead to disputes.
The Shafi’i school tends to require capital that is tangible and measurable, making it more restrictive.
The Hanbali school is moderate, balancing flexibility with contractual clarity.

Despite these differences, the schools share several core principles:

Profit distribution may follow mutual agreement.
Losses must follow capital proportion.
Honesty and transparency are non-negotiable.

This diversity, the authors argue, shows that classical fiqh provides a rich toolkit for modern adaptation—if institutions are willing to apply it seriously.

Key Finding 4: Musyarakah Exists in Modern Banking—but Remains a Small Portfolio Share

The authors explain that musyarakah in modern Islamic finance generally appears in two operational models:

Permanent musyarakah, where the bank’s ownership share remains constant.
Diminishing musyarakah (musyarakah mutanāqiṣah), where the bank’s ownership gradually decreases until the client owns the asset fully.

The second model is more widely applied in home financing, productive property acquisition, and asset-based investments because it is easier to standardize and manage.

However, the study notes that musyarakah financing still makes up less than 10% of Islamic bank financing portfolios, which remain dominated by trade-based contracts such as murābaḥah and ijārah.

Why Musyarakah Struggles: Four Structural Obstacles

The study identifies several key reasons why Islamic banks hesitate to expand musyarakah financing:

1) Risk and Prudential Banking Culture

Modern banking systems prioritize stability, liquidity, and capital protection. Musyarakah requires banks to accept direct business risk, which conflicts with conventional prudential logic.

2) Moral Hazard and Information Asymmetry

Banks worry that clients may not report profits transparently, making profit-sharing unreliable and vulnerable to manipulation.

3) High Monitoring Costs

Musyarakah ideally requires banks to supervise the business venture. This involves audits, expert staff, ongoing evaluation, and operational expenses.

4) Collateral Still Dominates

Even though musyarakah is supposed to be partnership-based, banks often still require collateral. This shifts the relationship toward secured financing, resembling conventional credit.

Together, these factors create a major gap between musyarakah as a Sharia ideal and musyarakah as a banking product.

The Study’s Central Conclusion: A Clash Between Risk Sharing and Risk Transfer

The authors argue that the main problem is not theological or legal. Instead, it is structural.

Sharia promotes risk sharing and distributive justice.
Modern banking institutions operate through risk transfer, where the goal is to minimize exposure.

This clash leads to what the study calls a reduction of musyarakah into quasi-credit arrangements, often shaped more by banking prudence than by partnership ethics.

Why This Matters for Society and the Islamic Finance Industry

This research has important implications:

For the public: it clarifies that Sharia compliance is not only about labels, but also about substance and ethical execution.
For Islamic banks: it offers a direct explanation of why profit-and-loss sharing contracts remain underdeveloped.
For regulators: it signals the need for an ecosystem that supports genuine risk-sharing mechanisms.
For universities and researchers: it provides a strong example of integrative Islamic finance scholarship linking Qur’an, hadith, fiqh, and institutional practice.

The authors suggest that musyarakah can move closer to its Sharia ideals if Islamic banks invest in transparency systems, strengthen Sharia audits, and shift their mindset from being fund providers to being true business partners.

Author Profiles

Deni Permana - STIES Saleh Budiman
Moh Najib - UIN Sunan Gunung Djati
Reni Farida Yanti - STIES Saleh Budiman

Research Source

Permana, D., Najib, M., & Yanti, R. F. (2026). Musyarakah from the Perspective of Interpretation of the Qur'an, Hadith, and Fiqh: Theoretical and Practical Relevance in Modern Islamic Finance. International Journal of Management Analytics (IJMA), Vol. 4 No. 1, 178–194.

DOI:https://doi.org/10.59890/ijma.v4i1.278

URL: https://dmimultitechpublisher.my.id/index.php/ijma