Qirad

Although the qirad is never mentioned in the Qur'an, many Islamic traditions attribute its origin to the Prophet Muhammad and his companions. These traditions describe Muhammad and his companions either using the qirad or endorsing the institution. Many will notice that the qirad is almost identical to the institution of the commenda later used in western Europe, though whether the qirad transformed into the commenda, or the two institutions evolved independently cannot be stated with certainty. == Legal technicalities ==

Though there existed several different major schools of Islamic law, the basic legalities of the qirad were rather uniform throughout the schools. Dinars and dirhams, as well as gold, silver, and copper coins in circulation were allowed to be invested. However, goods such as barley were restricted from the qirad because the possible fluctuations in their value in the markets. In the Mongol Empire, the contractual features of a Mongol-ortoq partnership closely resembled that of qirad arrangements, however, Mongol investors were not constrained using uncoined precious metals and tradable goods for partnership investments. The agent was allowed to take the investment and split up his investments in any way, as well as invest in anything he wanted, except in cases where stocks are plentiful and not seasonally bound. It was also permissible for an investor to forbid the agent from buying certain kinds of goods. Although the fractional split in profit was agreed on beforehand, the investor could not stipulate a specific sum of the money from the profit, or that a certain profit be made. In this way, the qirad remained a complete risk on the investor and did not infringe on the free market economy., It was however possible to make a deal on the split of the profit beforehand by stipulating a specific percentage. This could be either a low or a high percentage. On the other hand, the investor is allowed to buy goods from the agent if he does not connect any conditions to this transaction. The agent can also ask the help of a servant of the investor, but this servant also has to share in the profit and can not be asked to do any other work than work connected to the investment. The agent can use the principal for food and clothes if he should travel for his business, and the principal is large enough to allow it. If he stays at home this is not allowed. An agent can invest the money of an investor, the agent then becomes an investor himself, but he is then liable for the losses of the second agent. If the principal decreases, the original investor is allowed to ask the original agent to cover the loss. == Notes ==