Refining Pawah System Using Mudarabah Concept

Abstract

Pawah system, an informal agreement between breeder of livestock (entrepreneur) and capital provider, has been practiced from generations to generations in Malaysia. However, it is not realized that mudarabah (profit sharing) is embedded in pawah system. On the other hand, mudarabah is also facing some problems to be implemented in the Islamic banking context. Thus, the objectives of the study are to analyze the similarities between pawah and mudarabah in terms of concepts and features, and to investigate how the pawah system can be refined using mudarabah concept. The qualitative method was adopted where the data were collected to the present study by in-depth interview and library research. By the end of this study, it is found that the involved parties understand and know the concept, features and challenges of pawah and mudarabah; however, they did not know how to use the concept and features of mudarabah concept in pawah system properly. Also, mudarabah can be embedded in pawah system through mudarabah concept by introducing mudarabah concept in pawah system such as fixed-lock system. The result of this study attempts to put forward suggestions in improving the pawah system using mudarabah concept and propose ideas of having pawah system using mudarabah concept between the entrepreneur and capital provider.