Sharing in the profit as well as the loss in a mudaarabah contract

Q: I wish to do mudaarabah with a friend. I am the active partner. If I make a profit it'll be shared according to the percentage of profit agreed between us. However if I happen to make a loss, I take the responsibilty of returning the sleeping partner's money (capital). I take this guarantee. Is this halaal. If not please guide us to a legitimate way.

A: Such an agreement is against the laws of mudhaarabah. In the case of a loss, the Rabb-ul-Maal (investor/sleeping partner) will suffer the loss as there will be no profit.

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


Answered by:

Mufti Ebrahim Salejee (Isipingo Beach)