Loaning someone money and asking for a profit in return
Q: Is it permissible for me to lend someone money as a personal and ask for a profit in return. (The money will be used for business - I am not asking for a profit from the business).
The profit on the loan is fixed at 10% per annum. Then another 10% is added to the outstanding balance at the end of each year until fully paid. The term is fixed for 6 months to repay the loan.
A: Giving a loan with the condition that the loan has to be paid back with an additional amount over and above the loan amount is riba (interest). Interest is haraam in Islaam. Severe warnings have been sounded in the Quraan Majeed and Mubaarak Ahaadith for all those who get involved in the grave sin of interest.
Hazrat Jaabir (radhiyallahu ‘anhu) reports that Rasulullah (sallallahu ‘alaihi wasallam) cursed the one who consumes riba (interest), the one who feeds it to others, the one who records it (i.e. the transaction) and those who are witness to it (i.e. the transaction). Rasulullah (sallallahu ‘alaihi wasallam) also said, “All of them are equal (in the sin of interest).”
And Allah Ta'ala (الله تعالى) knows best.
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