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Financial Investment- Permissible or not permissible

Answered as per Hanafi Fiqh by ShariahBoard.org

Assalamualaikum,

I have a question regarding a financial decision as to what is permissible per the Shariah. The question is on behalf of my sister, she is planning to invest some of her saving into my elder brother business as Investment. She wants to investment on a specific project on which my brother in law (her husband) will also will be working on it. However, my brother does not really want to take it as investment but rather as an hand loan for a specific period of time to begin with for a period of 1 year and he plans to pay her 1% of her investment as a profit rate on monthly basis and at the end of the tenure she will get back her entire principal amount.

1. Is it permissible for her to take the 1% profit amount on a monthly basis for the amount which will be deemed as a hand loan? Since it is being deemed as a hand loan is it really a profit or any kind of Riba is getting involved into? Need guidance is it permissible for her?

2. If the same amount was deemed as investment into the project, considering her husband is working with my brother as a full time on the project. How much percentage of profit is permissible on it for her?

3. Also please guide us what are the steps we need to take before making any new investment to add blessing from ALLAH swt qair and Barakaah in it InshaaAllah.

الجواب وباللہ التوفیق

  1. The first scenario is impermissible due to being interest-based.
  2. If the brother accepts sister’s investment then she will become partner, both will share the profit and loss, however, it is not correct to take profit fixing a percentage based on one’s invested money. It is permissible to take profit based on the amount of profit.
  3. If the sister’s husband is employed with her brother and only takes the salary for the employment then it would be correct to work this way. If he works in any other capacity then ask for the fatwa elaborating the nature.
  4. It is necessary for the goodness and blessing in the business that
  5. It should be Halal and within the limits of the Sharia’t.
  6. There should be trustworthiness and truthfulness. One must completely stay away from lying and cheating.
  7. In addition to being particular of paying Wajib Zakat one should be particular of paying Nafl Sadaqahs
  8. One should be particular of paying the salaries of the employees on time.
  9. One should treat the partners and the employees well.
  10. One should be particular about making Dua’as.

واللہ اعلم بالصواب

This answer was collected from Shariahboard.org. It was established under the supervision of the eminent faqih of our era, Hazrat Shah Mufti Mohammed Navalur Rahman damat barakatuhum.

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