Giving a loan in lieu of interest
Question
I needed clarity on the following matter. I am providing capital to a friend for his business. This money is given as a Loan and will be paid back when I request.. The businessman uses the money, buys drinks and resells it to shops . We made an agreement that he will give me a share of his profits from his business. Is this correct..? Eg I give him an initial amount 100k as capital to use in his business and he gives me 50% of his profits monthly. Does the % of profits have to be stipulated? Can it vary from month to month on mutual agreement between us? If he does not stipulate the % of profits and gives me an amount based on his discretion, is this correct? Can I request the capital amount back at any time? Or does the time that he will be using the capital have to be stipulated at the initial time when I loan it to him?
Answer
It is not permissible to accrue any benefit/profit on a loan. Any funds over and above the loan amount will be regarded as interest.
The one involved in interest wages war against Allah Ta’ala and His Rasul Sallallahu Alaihi Wasallam:
“O you who believe. Fear Allah and give up what remains (due to you) from Riba, if you are really believers. And if you do not do so, then prepare for war against Allah and His Rasul.”
Furthermore, a person who engages in interest is cursed by Nabi Sallallahu Alaihi Wasallam:
“Jabir Radiallahu Anhu narrates that Rasulullah Sallallahu Alaihi Wasallam cursed the one who takes interest, the one who gives interest, the one who records it and the one who witnesses it and he said they are all equal.”
In principle, you may ask for the amount of money you loaned whenever you want, but if there was an agreement between you and the creditor then you should honour the contract.
Notwithstanding the above, if you enter into a partnership with the other party then the transaction will be in order. The partnership is termed as ‘Mudhaarabah’ where you will provide the capital and the other party will carry out the work. The time frame of the partnership must be stipulated and fixed. The net profits (after paying all expenses) will be shared between both partners according to the percentages agreed upon at the time of entering the partnership. The profits may be renegotiated whenever necessary. We suggest that you opt for an agreement of this nature instead of loaning the money to the other party.
References (Arabic / Urdu sources)
يأَيُّهَا الَّذِينَ ءَامَنُواْ اتَّقُواْ اللَّهَ وَذَرُواْ مَا بَقِىَ مِنَ الرِّبَواْ إِن كُنتُمْ مُّؤْمِنِينَ فَإِن لَّمْ تَفْعَلُواْ فَأْذَنُواْ بِحَرْبٍ مّنَ اللَّهِ وَرَسُولِهِ
عَنْ جَابِرٍ رضي الله عنه قَالَ لَعَنَ رَسُولُ اللَّهِ صلى الله عليه وسلم آكِلَ الرِّبَا وَمُوكِلَهُ وَكَاتِبَهُ وَشَاهِدَيْهِ وَقَالَ هُمْ سَوَاءٌ صحيح )مسلم #1219)
كل قرض جر منفعة لا يجوز مثل أن يقرض دراهم غلة على أن يعطيه صحاحا أو يقرض قرضا على أن يبيع به بيعا؛ لأنه روي أن كل قرض جر منفعة فهو ربا، وتأويل هذا عندنا أن تكون المنفعة موجبة بعقد القرض مشروطة فيه، وإن كانت غير مشروطة فيه فاستقرض غلة فقضاه صحاحا من غير أن يشترط عليه جاز (تبيين الحقائق 6/29 (
قالَ رسولُ اللَّهِ صلَّى اللَّهُ عليهِ وسلَّمَ المسلمون على شروطهم والصلح جائز بين المسلمين إلا صلحا أحل حراما (أبو داود #3594)
- Answered by
- Maulana Abdul Kader Fazlani
- Checked & approved by
- Mufti Mohammed Desai Saheb
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