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How does one compensate for using an interest-based loan for a start-up business? 

Answered according to Hanafi Fiqh by TheMufti.com

Q. Years ago, I was not inclined to Deen. So a friend of mine asked me for a R100.000.00 loan and I gave it to him on interest for a R150.000.00 return. After he repaid me the interest loan of R150.000.00, I used the same money to start-up my business which is a multi-million Rand buisness Today. I am concerned about the interest money I used to start my multi-Million Rand business. Is my entire business Haraam or just the interest portion of it?


A. As a general rule, it is Haraam for person to take or give interest loans. If an interest loan had been taken or given to a person, the interest money has to be returned to its original owner. A person should make sincere Taubah and Istighfaar for involving himself in such loans.

In the enquired case, the Halaal profit earned from your capital investment (interest) to your start-up business over the years is Halaal. The capital investment of interest to your start-up business will not affect the status of your Halaal profit of your multi Million Rand business Today. However, the interest portion of your capital investment (R50.000.00) to your start-up business is Haraam for you and has to be returned to your friend.

Note: It should be kept in mind that this is a case of a person giving an interest loan and benefiting from it negligently or ignorantly. Otherwise, it is not allowed at all for a person to do so intentionally or make this a means or source of his income.

Allah Ta’ala Knows Best

Mufti Ismaeel Bassa

This answer was collected from TheMufti.com, which is a fatwa portal managed by Mufti Ismaeel Bassa from South Africa.

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