Ref: tij010/08
March 2008
Q: I have a muslim friend who is involved in different types of investments, for example:
He had bought some properties and planned to do construction on these properties, he is a wealthy person but now and then due to his funds being tied up in other businesses he needs money to do construction on the properties, he then contacts me and asks for an x amount of money and i tell him what i have available ie. I lend him R100000.00 for a period of 6 months, in return he estimates what his profit will be on the property and gives me a return, so over a 6 month period he gives me R2000.00 a month and after the 6 months he returns the capital amount of R100000.00. Is this permissible? we have spoken about it and he feels that it is not an interest transaction, i am also comfortable with it but we wanted to get clarity on the matter.
A:
The arrangement mentioned in the question is not acceptable and in fact amounts to an interest based loan in terms of the Sharia. One permissible alternative could be that you purchase the required construction material and after taking possession of the same, you sell it to your friend at a fixed marked up price payable in e.g. 6 months.
Ameer, Darul Ihsan Islamic Services Centre