Human Capital Mudarabah (HCM) allows people to raise money in return for 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).
In this article we will investigate whether Human Capital Mudarabah is supported in the generous 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 the father who asked Moses to work for him for a period of eight years (minimum) or ten years (if Moses wanted to be generous), and in return he would be forgiven from the need to pay a dowry (typically an amount of money) if he wanted to wed one of the daughters.
Moses consented, married one of the daughters and worked for his father-in-law for the agreed upon period.
Put differently, the prophet Moses (may peace be upon him) committed the fruits of 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 the prophet 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!”
The commentator admits that Moses was “in service of the father for whatever the father asks for”. Accordingly, this would enable the father to give Moses the option of working wherever he chooses and sharing with the father whatever he earns.
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 benefit the father received could have certainly been in the form of an amount of money. As we mentioned, the father could give Moses the choice of working for someone else and sharing with him a portion of his income. This would not be a violation of their agreement.
Further, it is important to understand that money is simply a medium of exchange 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 that existed. 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 meaningful distinctions between the agreement Moses had with his bride’s father and between the Human Capital Mudarabah agreements I’ve described.
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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.”