Agricultural Profit-Sharing According to Islam

Compared to land leasing, I believe this form of agricultural partnership based on profit-sharing—known as muzara’ah—is superior and more highly recommended. Many hadiths support this view. Furthermore, within Islamic economics, "profit-sharing" is a very common financing product; indeed, laypeople often characterize Islamic economics simply as a "Profit-Sharing Economy."

Cultivating land through partnership is a practice permitted by Islamic teachings and is widely found in society today. God willing, this model benefits both parties, ensuring mutual gain. In the socio-economic realm of agriculture, the concept of "tenancy relations" is widely recognized; it encompasses various forms of temporary arrangements arising when land is managed by someone other than the owner. Tenancy relations are categorized into two types: leasing and profit-sharing. Indeed, the meaning of "tenancy relation" appears to align precisely with that of "muzara’ah," covering all forms of cooperation in cultivating another person's land—including both leasing and profit-sharing.

Additionally, land pawning (gadai) does not actually fall under the concept of muzara’ah, as pawning involves the land merely serving as collateral. However, based on my observations as a researcher, the practice in our society has evolved such that land pawning often becomes a means to acquire land for cultivation. This effectively creates a tenancy relation, even though it does not strictly fit the definition of "muzara’ah."

Definition and variations of muzara’ah (profit-sharing)

Although muzara’ah could technically encompass both leasing and profit-sharing, many hadiths—perhaps due to translation nuances—have led to a narrower interpretation: muzara’ah is specifically associated with "profit-sharing," whereas land leasing is referred to by the terms ijarah or kira’. Therefore, in this context, "muzara’ah" is defined as a land cultivation partnership in which an owner entrusts their land to another person for planting, with the resulting harvest subsequently shared between them. Linguistically, muzara’ah refers to a transaction involving land based on the sharing of its produce.

Based on research across various sources, I have identified several variations of profit-sharing models, as follows:

First, the musaqat model. In this arrangement, a worker is entrusted with tending a plot of land that already has established crops—such as date palms—and receives payment in the form of a share of the harvest. This means that when the worker arrives, the plants are already mature, whether or not they have yet borne fruit. This practice is common in plantation agriculture. It appears to be the method the Prophet applied with the farmers of Khaybar.

Musaqat is defined as an arrangement where a person entrusts trees to another individual to irrigate and maintain them in exchange for a specific share of the fruit. This differs from daily-wage labor. A rough equivalent found in Indonesia is the bawon system for rice farming; here, the worker is responsible for planting and harvesting, while the owner handles maintenance tasks like irrigation and spraying. The bawon farmer receives payment at harvest time, typically a one-sixth or one-seventh share of the gross harvest.

Musaqat (an agricultural partnership contract) is permissible based on the cooperative arrangements established by the Messenger and the Rightly Guided Caliphs after his passing. Imam Bukhari narrates from Abdullah bin Umar that the Messenger of Allah (PBUH) instructed the people of Khaibar to cultivate the land of Khaibar in exchange for a share—specifically half—of the crops or fruit produced by the land. Similar contracts were also entered into by Abu Bakar (RA), Umar bin Khattab (RA), Uthman bin Affan (RA), and Ali bin Abu Talib (RA).

Two, the seeds are provided by the owner. Several hadiths state that the owner must provide the seeds. The rationale behind this obligation can be traced back to the fundamental concept of land ownership: a farmer does not possess absolute ownership of the land itself but merely holds the right to utilize it. By providing the seeds, the owner maintains a tangible "link" to the obligation of land utilization; if the owner were to provide nothing, it might create the impression of full, absolute ownership.

Imam Bukhari recounts in his Sahih collection that Umar bin Khattab (RA) practiced this method, providing the seeds himself as the owner and receiving more than half of the yield. Conversely, if the farmers provided the seeds, they would receive more than half the yield.

What is the correct profit-sharing model? I have not yet found a definitive reference on this specific point. However, in the profit-sharing practices of the Messenger and the Caliphs, the share allocated to the cultivating farmer was never less than half—as seen in the arrangement with the Jewish farmers of Khaibar. It is considered inappropriate for the landowner's share to exceed that of the cultivator.

Three, the seeds are provided by the cultivating farmer. Regarding the arrangement with the Khaibar farmers—which continued until the Messenger’s passing—one hadith mentions that the farmers bore the costs and provided the seeds, rather than the Prophet doing so. This implies that the seeds may be provided by the farmer, the owner, or both parties jointly.

This is the practice commonly observed in Indonesia, where the owner typically receives one-third of the gross yield. A cultivator who provides the seeds, fertilizer, and land preparation—thereby incurring those costs—receives a two-thirds share; a practice that does not appear to have existed during the time of the Prophet. Interestingly, upon closer examination, the landowner's share remains roughly the same even when they provide the seeds and fertilizer under a "fifty-fifty" split arrangement.

It turns out the farming community has calculated the economics so precisely that, despite the differing methods, the resulting obligations and entitlements end up being similar. Variations in sharing arrangements are driven by factors such as soil fertility and, crucially, the ratio of available land to the number of farmers. As the number of landless farmers rises, the share allocated to the tenant farmer is squeezed to the absolute minimum; yet, like it or not, the tenant accepts the terms rather than having no land to cultivate at all—this persists despite the existence of Indonesia's Law No. 2 of 1960 concerning Agricultural Sharecropping Agreements.

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