Investment scheme

Q: My father joins a profit-sharing business which guarantee a monthly dividend between 15% to 30% for up to 1 year (with no guaranteed principle). My question is, is it permissible for me to market this profit-sharing business and make out a sideline business agreement out of it with my potential client? The agreement shall state that, I shall be the guarantor of the principle amount given for the purpose of the profit-sharing business. In return, the client shall pay me a 3% monthly dividend for the period of 1 year. In the event that the business collapses, I shall be liable to pay back the principle amount to my client.

A: This is not permissible. Attaching the condition that the capital investment will have to be returned in all cases is not an investment but a loan. Any money given or received over and above the loan amount will be interest. This is no different to the workings of a bank. The money invested in a bank is in actual fact a loan which has to be paid back in full.

And Allah Ta'ala (الله تعالى) knows best.


Answered by:

Mufti Zakaria Makada

Checked & Approved:

Mufti Ebrahim Salejee (Isipingo Beach)