Can I get a percentage profit on a loan?
Question
السلام عليكم I have a friend who is in to watch and jewellery trading business . He needs some capital for his business and asked me for funding . He is assuring me a return of 4 percent per month. Is it permissible for me to accept it or should I ask him for a percentage of the profit ? Please clarify
Answer
In the Name of Allah, the Most Gracious, the Most Merciful.
As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.
It is not permissible for you to offer a capital loan to your friend and receive a repayment of the loan with a percentage profit every month. The excess payment will be Riba (Interest) which is prohibited
A Sharī῾ah Compliant alternative is through the:
Mudārabah Contract
Musharakah Contract
MUDARABAH
One partner provides the capital and the other provides his labour,
Both parties mutually agree to share the profits,
If there is a loss, it will be consumed from the capital.
MUSHARAKAH
The capital contribution is from all the partners,
The profits will be divided according to a mutually agreed percentage,
If there is a loss, it will be pro-rata to the capital contribution.
And Allah Ta’āla Knows Best
- Answered by
- Huzaifah Deedat (Student Darul Iftaa)
- Checked & approved by
- Mufti Ebrahim Desai
Where scholars differ, it’s safer to take the more cautious view.
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Source: Jamiatul Ulama KZN — https://jamiat.org.za/can-i-get-a-percentage-profit-on-a-loan/
Fatawa SA: https://fatawa.co.za/fatwa/jamiat-17629
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