Institutionalization of mudarabah: Potential for implementation as a foundation

Mudarabah is a commercial contract based on labor-capital partnership. This contract was used before Islam and is considered permissible in Islamic law. This contract is discussed in detail in Islamic law books. In Islamic sources, trading in halal ways, establishing partnerships, transforming money, including it in production, etc. are praised actions. It takes serious measures against actions such as interest, gambling and monopolization that will lead to unjust gain and usurpation of rights. Mudarabah, which encompasses trade, partnership, risk sharing and solidarity, is a practice that will ensure fair sharing and may be an alternative for Islamic finance. Mudarabah, which was practiced in Ottoman economic life and money foundations, is used in participation banks today. Mudarabah, which is widely used in the fund collection part of these institutions, is not preferred in the fund disbursement part. There are many factors for this, but the main reason is that it involves high risk in its implementation and is more difficult to implement than other financial transactions. Mudarabah partnership is a partnership established for investment purposes. Operating a Mudarabah carries a risk of profit sharing or loss depending on the earnings of the investee operator. In order for the process to take place in a transparent and reliable manner, the business owner needs to be specially audited. Such an audit will reduce the risk a little more and encourage investors to enter into this partnership. However, since the bank conducts many transactions and its customer network is very wide, the implementation of this is an arduous process within the bank. Investment is not only about investing money in foreign currency or stocks and making an individual gain, but also about a sustainable financial process that includes the elements of capital, labor, land and entrepreneurship, where production takes place continuously and all segments will benefit. For this, long-term funds are needed. Short-term funds are more affected by changes in the market and this leads to rapid price changes. Long-term investments are more profitable and have more growth potential than short-term investments. In addition, since buying and selling transactions occur more frequently in short-term transactions, it increases investment costs and leads to a decrease in investment activities. Therefore, it is difficult to actively utilize mudarabah-based investment activities within the bank. Investment requires long-term funds and foundations are long-term funds. Foundations are more suitable or independent organizations in terms of using and lending a single financing instrument and carrying out activities to increase investment activities. Unlike money foundations and Islamic banks, venture capital companies, which are institutionalized on a single financial transaction, provide funds to a large number of people through labor-capital partnership and pioneer technological innovations and entrepreneurial activities. The institutionalization of mudarabah in the waqf model in this way is important in terms of continuing the tradition of waqf that responds to the needs of the public, creating an alternative institution in the field of Islamic finance, meeting people's credit needs in accordance with Islamic law, increasing investment activities and ensuring financial sustainability and effective resource management. In this study, the mudarabah contract is discussed within the framework of Hanafi jurisprudence, money foundations and participation banks, which are among the Islamic financial institutions established on the basis of mudarabah, are examined in detail, a scheme for the institutionalization of mudarabah as a foundation is created and its potential for implementation is discussed.