Human Capital Mudarabah (HCM) allows people to raise money for themselves in return for them committing to share a fixed percentage of whatever they earn for a fixed period of time in which they are working.
I’ve been advocating for the adoption of HCM agreements in the Muslim community and while the default ruling on anything in Islam is permissibility, it helps to have explicit support for an idea in the Quran or Sunnah (the life and sayings of the prophet Muhammad peace be upon him). I believe there is such support for Human Capital Mudarabah in the Quran.
The Quran reports that after Moses arrived in Madyan, he witnessed two female shepherds driving back their flocks from a well. Moses approached them and inquired about their work as shepherds and their retreat from the well. Upon hearing their answers and the old age of their father, Moses watered their flocks for them. The two females returned to their home and informed their father of the incident. Moses was then invited by their father. Their father asked Moses to work for him for a period of eight years (minimum) or ten years (if Moses wanted to be generous), in return for marriage to one of his daughters. Moses consented and worked for him for the agreed upon period.
In other words, the prophet Moses committed his future labor for a fixed period of time in return for the dowry [a mandatory payment, in the form of money or possessions paid by the groom to the bride]. This agreement, for all intents and purposes, is a Human Capital Mudarabah (HCM) agreement.
The possible objections to the claim that Moses and his bride’s father were engaged in a Human Capital Mudarabah agreement are summarized in this commentator’s response:
“As for your assertion that the prophet Moses made a similar arrangement wherein he agreed with his future wife’s father to work for him for 8 years and for his future work to be in place of the dowry, this is an erroneous analogy. This is because the work Moses was going to do was known and he was in service of the father for whatever the father asks for. Therefore the object of the contract was the benefit the bride’s father was going to receive from Moses’s work and not an amount of money. The father did not tell Moses to go work wherever you like and give me a share of what you earn, so observe the difference!”
It’s true that in Moses’s arrangement he was working directly for the father whereas Human Capital Mudarabah agreements allow the investees to work for the employer they choose, so what??
The commentator admits that Moses was “in service of the father for whatever the father asks for”. So assume the father told Moses he has the option of going to the nearest city and working in whatever he wants and sharing with him a percentage of whatever he earns. Is that a violation of the agreement? Quite the contrary, it gives Moses more options.
As for the statement “the object of the contract was the benefit the bride’s father was going to receive and not an amount of money”, there are many things wrong with this statement:
The object of a Human Capital Mudarabah contract is not an amount of money, it is a projected amount of benefit that the investor will receive. Just as it was in Moses’s financing contract. The investor in a Human Capital Mudarabah contract is not entitled to any amount of money. They are entitled to benefit from a portion of the fruits of the investee’s labor (if those fruits materialize). Exactly like the prophet Moses’s father-in-law who would have been well within his right to tell Moses to work for someone else and share with the father in law whatever he earns working there.
Remember, money is a medium of exchange. An intermediary used in trade to avoid the inconveniences of a pure barter system. It just so happens that in the example of Moses and his father-in-law, pure barter was possible because of the coincidence of needs. Moses wanted to get married and the father needed the prophet’s physical help. If Moses and his father-in-law did not have a coincidence of needs and decided to use a medium in their exchange, nothing about their transaction would be fundamentally changed.
Accordingly, I find there are no reasonable grounds to distinguish between the agreement Moses had with his bride’s father and between the Human Capital Mudarabah agreements I’ve described.
We mustn’t read the Quran as we would a regular story but rather as scholars searching for meaning, wisdom and truth.
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And when he came to the well of Madyan, he found there a crowd of people watering [their flocks], and he found aside from them two women driving back [their flocks]. He said, “What is your circumstance?” They said, “We do not water until the shepherds dispatch [their flocks]; and our father is an old man.”
So he watered [their flocks] for them; then he went back to the shade and said, “My Lord, indeed I am, for whatever good You would send down to me, in need.”
Then one of the two women came to him walking with shyness. She said, “Indeed, my father invites you that he may reward you for having watered for us.” So when he came to him and related to him the story, he said, “Fear not. You have escaped from the wrongdoing people.”
One of the women said, “O my father, hire him. Indeed, the best one you can hire is the strong and the trustworthy.”
He said, “Indeed, I wish to wed you one of my two daughters, on [the condition] that you serve me for eight years; but if you complete ten, it will be [as a favor] from you. And I do not wish to put you in difficulty. You will find me, if Allah wills, from among the righteous.”
[Moses] said, “That is [established] between me and you. Whichever of the two terms I complete – there is no injustice to me, and Allah , over what we say, is Witness.”