Is it permissible to receive a fixed return on an investment?

The transaction in reference is non-Shariah-Compliant. The Shariah-Compliant alternative is to enter into a Mudaarabah partnership.

In brief, a Mudaarabah partnership entails one person giving another person capital to do business and both share the profit based on a percentage of profit share. For example, Hamzah gives R100 000 to Zaid as capital to do business and they agree on a 50% profit share.

Hamzah and Zaid cannot agree on a fixed profit share, for e.g. they cannot share a fixed amount of R50 000 profit as this will be tantamount to interest. The business could make R40 000 but Zaid will have to pay Hamzah R50,000 or the business could make R60,000 and Zaid will only have to pay Hamzah R50,000.

Therefore, in the enquired situation, it is not permissible to agree on a fixed amount of profit share i.e. R50 000 on your investment of stock in your friend’s business. The correct method would be to agree a percent of profit share, e.g. 50% must be agreed upon for the investment to be Shariah-Compliant.

And Allah Ta’ala Knows Best