السلام عليكم I have a friend who is in to watch and jewellery trading business . He needs some capital for his business and asked me for funding . He is assuring me a return of 4 percent per month. Is it permissible for me to accept it or should I ask him for a percentage of the profit ? Please clarify
In the Name of Allah, the Most Gracious, the Most Merciful.
As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.
It is not permissible for you to offer a capital loan to your friend and receive a repayment of the loan with a percentage profit every month. The excess payment will be Riba (Interest) which is prohibited
A Sharī῾ah Compliant alternative is through the:
- Mudārabah Contract
- Musharakah Contract
- One partner provides the capital and the other provides his labour,
- Both parties mutually agree to share the profits,
- If there is a loss, it will be consumed from the capital.
- The capital contribution is from all the partners,
- The profits will be divided according to a mutually agreed percentage,
- If there is a loss, it will be pro-rata to the capital contribution.
And Allah Ta’āla Knows Best
Student Darul Iftaa
Checked and Approved by,
Mufti Ebrahim Desai.