Share of profit fixed as percentage of capital

Q: A invested R100 000 in B’s business. A told B that he is investing in his business on the condition that he receives 10% of his capital investment every month as profit. Is this type of investment permissible? If this type of investment is impermissible, how shou​ld the profit sharing be fixed?

Bismillaah

A: Stipulating the profit subject to the capital investment is not permissible. This, in actual fact, is riba (interest). Hence it is not permissible for one to stipulate that his monthly profit be 10% of his capital (10 % of R100 000 which is R10 000 a month). If one stipulates his profit in this manner then the returns he receives will be riba (interest). 

The correct method of investing is that the partners stipulate the percentage of profit according to the profits that accrue from the business e.g. 10% of the monthly profit generated by the busniess. Hence if profit was made, the partners will receive their stipulated shares of the profits and if no profit was made, none of the partners will receive any profit. In a partnership, each partner will share in the profit as well as the loss of the business. To attach the condition that a partner will only share in the profits and not in the losses is an invalid condition in Shariah.

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

( وشرطها ) أي شركة العقد ( كون المعقود عليه قابلا للوكالة ) فلا تصح في مباح كاحتطاب ( وعدم ما يقطعها كشرط دراهم مسماة من الربح لأحدهما ) لأنه قد لا يربح غير المسمى (الدر المختار 4/ 305)

و لا يجوز الشركة إذا شرط لأحدهما دراهم مسماة من الربح لأنه شرط يوجب انقطاع الشركة فعساه لا يخرج الا قدر المسمى لأحدهما (الهداية 2/ 632)

قال ومن شرطها أن يكون الربح بينهما مشاعا لا يستحق أحدهما دراهم مسماة من الربح لأن شرط ذلك يقطع الشركة بينهما ولا بد منها كما في عقد الشركة (الهداية 3/ 258)

Answered by:

Mufti Zakaria Makada

Checked & Approved:

Mufti Ebrahim Salejee (Isipingo Beach)