How fluctuating deposits and withdrawals may be handled in a running partnership account Read the bilingual lesson for Running Partnership (مشاركة) and Daily Products and test your understanding with a focused quiz.
Lesson
1. The Problem of a Running Account
Working-capital finance often does not remain fixed. A client may draw money, return surplus funds, and draw again as needed. The question is whether a running partnership (مشاركة) can handle this changing pattern without becoming an interest-bearing loan.
The purpose is not to trace every rupee into one particular transaction. It is to give a consistent method for measuring how much capital remained in the joint pool and for how long.
2. A Proposed Five-Part Framework
A running partnership may be structured so that a stated share of actual profit goes to management, the remaining profit goes to investors, genuine loss follows investment, the financier's capital is measured through average daily balances, and final profit is distributed according to capital utilized over time.
For banking practice, the rule must also be workable in accounting and monitoring. The aim is to preserve genuine risk-sharing while using a method that can be audited and applied consistently.
3. What Does 'Daily Product' Mean?
Daily product combines amount and time. Rs. 100,000 invested for 30 days produces 3,000,000 rupee-days.
Term explanation: Daily product: amount invested × number of days that amount remained in the joint pool.
The purpose is not to trace every rupee into one particular transaction. It is to give a consistent method for measuring how much capital remained in the joint pool and for how long.
4. How Profit Is Derived
At the end of the term, actual aggregate profit is known. Total daily products are compared, producing an average profit per rupee-day. Each investor's daily products then determine his share of the investors' profit pool. The method allocates actual profit; it does not guarantee a return.
For banking practice, the rule must also be workable in accounting and monitoring. The aim is to preserve genuine risk-sharing while using a method that can be audited and applied consistently.
5. The Main Objection
Some contemporary scholars object that daily products are only an approximation. A business may earn a large profit while one investor has little money in the pool, or suffer a large loss while another has a large balance. Averaging the whole term may therefore not mirror the exact transaction-by-transaction use of each investor's cash.
For banking practice, the rule must also be workable in accounting and monitoring. The aim is to preserve genuine risk-sharing while using a method that can be audited and applied consistently.
6. Why Profit Is Not Tied to One Partner's Specific Cash
Once a joint partnership pool exists, transactions made for that partnership belong to the joint enterprise, not to the individual banknotes used in a specific purchase. A partner's entitlement comes from the partnership relationship and fulfilment of his capital commitment.
For banking practice, the rule must also be workable in accounting and monitoring. The aim is to preserve genuine risk-sharing while using a method that can be audited and applied consistently.
7. The A and B Example
A and B agree to a Rs. 100,000 partnership, each committing Rs. 50,000, with equal profit sharing. Before A pays, B uses his Rs. 50,000 to earn Rs. 10,000 profit. Later A's Rs. 50,000 is used in a transaction that loses Rs. 2,000. Net profit is Rs. 8,000, so each receives Rs. 4,000.
The example is useful because it separates the legal roles from the cash movement. Once those roles are clear, the same principle can be applied to more complex commercial cases.
8. Unknown Capital at the Start
Classical jurists differ on whether capital must be known at contract. The Hanafi position does not make exact prior knowledge an absolute condition if uncertainty does not cause dispute and profit can be determined clearly at distribution. Imam al-Shafi‘i's position requires capital to be known.
The ownership must be real rather than only documentary. Rights, benefits and the relevant ownership risk should follow the share actually owned at that stage.
9. Why the Method Matters in Banking
If investors could enter only on fixed dates and could neither add nor withdraw funds during the term, modern deposit accounts would be extremely difficult to operate. Daily products seek to accommodate changing balances while retaining actual profit-sharing.
This is a proposed modern application and not an uncontested classical formula.
For banking practice, the rule must also be workable in accounting and monitoring. The aim is to preserve genuine risk-sharing while using a method that can be audited and applied consistently.
The method is presented as a modern application requiring careful juristic consideration.