22 chapter one
particular. Part of the fee would probably go towards the protection
money the caravan organizers would have to pay to the powerful
tribes along the trade route for a safe passage through their land.
In the absence of hard evidence to the contrary, it is conceivable to
“hypothesise” that these were the sort of arrangements that prevailed
given the particularly harsh reality of the surrounding environment.
The profit of the partnership was to be shared according to pre-
determined proportions, but the loss was to be borne by the fund
supplier with the non-financier managing partner having to work
without material compensation (ibid.). The Prophet is said to have
taken part in these caravans acting for a wealthy lady, Khadigah,
who later became his wife. The partnership, or Mudharabah as it
was known then, was approved of after the coming of Islam and
continued to serve as a legitimate mode of business finance under
Islamic law until the present day. If all partners provided finance,
including the managing partners, the Mudharabah was to be called
Mushàrakah; a slight differentiation to indicate that the funds were
provided by all, which would have some important implications for
the distribution of profits or allocations of losses. The Mushàrakah
may employ a working manager for a predetermined pay. Mushàrakah
also survived the coming of Islam and continued to serve as an
acceptable Islamic mode of business and finance until the present
day. Islamic banks, which were established in the late twentieth cen-
tury, use Mudharabah and Mushàrakah in their financing.
In a busy trade centre, like that of Makkah, money changers must
have existed and exercised a significant role in what was at the time
an international trade. They were the traveling merchants who had
centres in Makkah and who were more able than others to com-
pare the value of currencies, realize the change of value when it
occurred, and acknowledge the differences resulting from possible
tampering with the quality and quantity of the metal in the cur-
rency (Wilson, 1983). Pilgrimage would have necessitated the need
for their services further. In addition, as they became wealthy mer-
chants they were able to provide finance when it was required.
Finance was needed for two purposes: business and personal.
Lending for business and personal purposes was provided at a rate
calculated on the basis of the amount borrowed and the period of
the loan to maturity. If the borrower was not able to pay in time,
a deferment of payment may be granted by the lender but with an
additional charge. The loan capital would therefore be subject to an