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Share business

Answered according to Hanafi Fiqh by Fatwaa.com

salam. I have a small amount of cash money and I want to give that money to my friend to do business with that money and to share profit with me but In case of loss I do not want to share loss with him because of my extreme poverty and my friend is agree upon this contract. Is this legal?

Answer

Wa’alaykum as Salam wa rahmatullahi wa barakatuhu,

This type of an agreement is called Mudharabah.

Mudharabah is a business partnership wherein one partner contributes his capital to the partnership while the other partner manages the capital.

 

In a Mudharabah agreement, the investor (that is you in this case) is liable for all the loss, if there was no negligence on the path of the worker. 

It is not permissible for you to stipulate that you will not share in the loss.

You should conduct full investigations and do a proper due diligence before investing. Only invest if you are comfortable, and certain that the chances of loss are minimal, and risks are covered. Thereafter, place you faith in Allah.

 

And Allaah Ta’aala knows best

Wassalaam,

Ismail Moosa (Mufti)

References

كتاب المضاربة

المضارب شريك رب المال في الربح ورأس ماله الضرب في الأرض، فإذا سلم رأس المال إليه فهو أمانة، فإذا تصرف فيه فهو وكيل، فإذا ربح صار شريكاً، فإن شرط الربح للمضارب فهو قرض، وإن شرط لرب المال فهو بضاعة، وإذا فسدت المضاربة فهي إجارة فاسدة، وإذا خالف صار غاصباً، ولا تصح إلا أن يكون الربح بينهما مشاعاً؛ فإن شرط لأحدهما دراهم مسماة فسدت، والربح لرب المال، وللمضارب أجر مثله، واشتراط الوضيعة على المضارب باطل، ولا بد أن يكون المال مسلماً إلى المضارب، وللمضارب أن يبيع ويشتري بالنقد والنسيئة ويوكل ويسافر ويبضع، ولا يضارب إلا بإذن رب المال، أو بقوله: اعمل برأيك…..(الاختيار لتعليل المختار – ص: 27)

This answer was collected from Fatwaa.com which is an excellent Q&A site managed by Mufti Ismail Moosa from South Africa. .

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