SriSemantanGold.com
"Gold Works, You Relax"
Kedai Emas Sri Semantan
Profit Sharing (Mudharabah)
KESS business operates on the Islamic financing concept of Mudharabah, a profit-sharing partnership built on fairness and transparency.
By Adopting Profit Sharing/Mudharabah, KESS Offers An Openness Approach That Promotes Ethical Business, Shared Responsibility, And Mutual Benefit
What Is Profit Sharing or Mudharabah?
Profit sharing, or Mudharabah, is an Islamic financing arrangement where one party provides capital and another manages the business, with profits distributed according to a pre-agreed ratio.
Instead of earning fixed interest, returns are based on actual business performance, ensuring a fair and transparent partnership.
How Profit Sharing or Mudharabah is done?
In a gold retail business, Mudharabah is conducted by having our clients (SSPC Members) to provide capital to fund the purchase and trading of gold via all SSPC Products, while the business manages sourcing, manufacturing, pricing, and sales operations.
Profits generated from gold sales are then shared between SSPC Members and the business based on a pre-agreed ratio, ensuring returns are tied to actual performance rather than fixed interest.
What is the Shariah ruling on Profit Sharing or Mudharabah?
Under Islamic law, Profit Sharing or Mudharabah is a permissible (halal) arrangement, as it is based on mutual consent, transparency, and risk sharing rather than guaranteed returns.
Profits must be distributed according to a pre-agreed ratio, while losses are borne by the capital provider unless caused by negligence or misconduct by the manager.
This structure complies with Shariah principles as it avoids Riba (interest) and promotes fairness, accountability, and ethical business conduct.
What need to be done to ensure that the sales in gold retail business observed the Shariah requirements for profit sharing?
To ensure that gold retail sales under profit sharing or Mudharabah comply with Shariah requirements, the business must adheres to strict controls such as executing clear profit-sharing agreements upfront, maintaining full transparency in pricing and transaction records, and ensuring that all gold sales follow spot (on-the-spot) transactions to avoid deferment issues associated with ribawi items.
Proper segregation of funds, accurate profit calculation based on actual performance, and oversight by a Shariah advisor further ensure that operations remain free from Riba, uncertainty (gharar), and non-compliant practices.
How KESS Executes Its Business & Offers Profit Sharing (Mudharabah) To Members?
EFFECTIVE STRATEGIES FOR MANAGING CAPITAL FOR KEDAI EMAS SRI SEMANTAN (KESS)
PROFIT ILLUSTRATION FOR GOLD SPOT PRICE
(A) KESS Buying Price For Gold From Customers (Buyback)
= RM542/Gram
(B) KESS Selling Price If The Gold Is Still In Good Condition (Preloved)
= RM577/Gram
(C) KESS Profit From Preloved Sales: (B) RM577 - (A) RM542
= RM35/Gram
(D) KESS Selling Price If Convert Into New Gold
= RM600/Gram
(E) KESS Profit From Selling New Gold Sales: (D) RM600 - (A) RM542
= RM58/Gram
KESS Is Able to Generate Profit Even Through Only One Cycle of Operations.
Nevertheless, KESS Also Earns Profits Repeatedly Through Daily Gold Retail Sales Activities Across All Its Branches.
However, Profit Sharing Payments to SSPC Members Are Only Made Once a Month Which Enables KESS Is Able to Share Profits With All SSPC Members Without Issues.
PROFIT ILLUSTRATION FOR SPECIAL TRADE IN
(A) Assuming 1,000 Gram Of 916 Gold Were Contributed For STI
(B) KESS Will Melt The 1,000 gram Of 916 Gold At The Factory Into New Gold Product
(C) KESS Will Sell the New 916 Gold Product At The New Selling Price
= RM600 x 1,000 Gram = RM600,000
(D) The Sold Capital Of RM600,000 Will Be Used To Re-Purchase Used Gold At The Scrap Pricing To Repeat Step (B)
= RM600,000 / RM542 = 1,107 Gram (Extra 107 Gram Per Cycle)
(E) Presuming KESS Would Be Able To Repeat 10 Cycle Per Month, KESS
Will Be Able To Gain Profit Of 1,070 Extra Gram Per Month
(E) Presuming KESS Re-Sell the (E) 916 Gold At Buyback Price
= RM545 x 1,070 Gram = RM583,150 Gross Profit Per Month
(F) Company Costing Calculation
Raw Material Cost: NONE (STI Customers Submit The Gold To KESS)
Factory Fee (between RM5 to RM25)
​
Average Wage (Estimated) : RM10 X 1000 = RM10,000
​
Wage Cost for 10 rounds = RM100,000​
(G) SSPC Pay Out Costing Calculation
COSTS FOR SSPC Pay Out (STI Owner)
= RM20 X 1000 grams = RM20,000
Pay Out (Matching Bonus 7 Level)
= RM7 X 1000 grams = RM7000
Total Pay Out Paid once a month
= RM27,000
KESS Profit Percentage
= (E) RM583,150 - (G) RM27,000 / (F) RM100,000
= 556% Per Month!
CAPITAL BREAK DOWN FOR KESS
Despite Any Declination In Gold Prices, KESS Would Not Suffer Losses Because It Was Able To Increase Its Gram Holdings (Gold Reserves) Through Gold Purchases At Lower Prices, Thus Obtaining A Higher Number Of Grams.
The Decline In Prices Also Allowed For A Significant Increase In The Company's Gold Reserves, Especially With A Strong Cash Position That Provided Greater Purchasing Capacity At Lower Prices.
Hence, When Gold Prices Rises Back Again, The Company Has The Potential To Generate Significant Profits.
For STI And Gold Saving Depositors, Gold Is Only Returned After A Period Of Six Months, Therefore, The Company Would Usually Has A Sufficient Gold Holdings When The Contract Reaches Maturity.
