Kindly advise regarding the following situation:
Ebrahim wants to set up his nephew in a business. Ebrahim will provide all the capital and his nephew will be running the business and will receive a fixed salary as well as a fixed % of the profits. Is this arrangement permissible? If not what is the alternative.
This will fall under the category of Ijarah (hiring) in terms of Islamic Finance. Ebrahim will be hiring his nephew to run the business and in turn, pay his nephew for the services he has rendered (by running the business for him). Together with that, Ebrahim will be awarding his nephew an incentive of a fixed percentage based on the profits of the business. The Fuqahaa (Jurists) have stated that this is permissible. (Imdadul Ahkaam)
And Allah Knows Best
Mufti Suhail Tarmahomed
Checked and Approved:
Mufti Ebrahim Desai