A Jurisprudential Analysis of Sharecropping (Muzara’ah) Sukuk in Iran’s Capital Market and the Possibility of Linking It to the Money Market

Abstract

The present study provides a jurisprudential examination of Sharecropping (Muzara’ah) Sukuk as one of the Islamic financial instruments. In Imami jurisprudence, the sharecropping contract is considered a valid agreement based on the division of agricultural yields between the landowner and the farmer. Although this contract has not been practically applied in Iran’s banking system due to the tendency of banks toward fixed-return contracts, its potential remains significant. This research adopts a descriptive–analytical approach, explicating the essential conditions of validity such as determination of the period, type of seed, suitability of the land, lawful ownership of benefits, and joint shares of the parties, and adapts these to the structure of Sukuk. Furthermore, issues such as permissibility of secondary sharecropping, possibility of multiple parties, and diverse obligations of both landowner and cultivator are analyzed, showing that such flexibility can also be reproduced within Sukuk structures. The study also introduces different types of Sharecropping Sukuk (specific, general, and liquidity-financing) and their operational pillars, while presenting a practical model for bank-issued Sukuk. It demonstrates that these securities, fully compliant with Shariah, have the capacity to mobilize both retail and institutional funds and direct them toward the agricultural sector. From a legal perspective, issuance of such Sukuk is permissible under the “Law on the Development of New Financial Instruments and Institutions,” although it requires drafting executive by-laws and full compliance with regulatory requirements. Findings indicate that Sharecropping Sukuk can, alongside strengthening the real economy and enhancing food security, reduce the financing burden on banks and contribute to deepening the capital market as well as achieving economic justice.