Practices analysis of <i>Mudharabah</i> contracts: a study of goat farming in Indonesia

Purpose Empirically, many goat farmers, particularly within several cooperatives, are unaware of and often violate the terms and conditions of Mudharabah contracts. This study aims to investigate the practical application of Mudharabah contracts in goat farming, facilitating better management of such contracts following Sharia law. It also seeks to examine collaborative practices more comprehensively and robustly within the local community context. Design/methodology/approach This study uses an applied qualitative research approach to elaborate on contract practice phenomena empirically. A systematic literature review and case study methodology were used to analyze the issues surrounding Mudharabah contracts in goat farming. Data were collected through unstructured interviews and observations with farmers from the most significant populations. The researchers’ direct observations and personal experience as investors also strengthened the findings. Findings The results indicate that implementing Mudharabah contracts generally complies with the pillars and legal requirements of Islamic economics and Sharia principles. Investors either raise goats themselves or entrust them to others for profit sharing. While farmers are largely unfamiliar with the formal terms of the contract, the cooperative practices in goat farming largely adhere to Sharia standards. However, there are shortcomings in global contract obligations, including rights and responsibilities, profit sharing, risk coverage and provision of land capital and cage construction. Practical implications This study highlights the critical need for increased awareness and a clearer understanding of the importance of authentic, written contracts. Furthermore, it provides a foundation for future research by offering reference points for investigating the relationship dynamics in Mudharabah contracts within goat farming. Originality/value To the best of the authors’ knowledge, this paper is the first to structurally review existing literature on Mudharabah contracts published in reputable journals indexed by Scopus, Web of Science (ISI Thomson) and others.