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Giving a loan with a condition of a partnership

Answered according to Hanafi Fiqh by TheMufti.com

Q. A businessman approached me to offer me a loan to start up my business after my shop was looted. He also asked for a 20% shareholding in my business. Can I accept the loan and give him a 20% shareholding in my business?

A. In principle, it is not permissible to derive any benefit from a loan as it is tantamount to interest (Riba).

Thus, in the enquired situation, if the businessman intends to offer you a loan to start up your business, he cannot ask for a 20% shareholding in your business. He will only be entitled to the repayment of the principle amount of the loan as asking for a 20% shareholding in your business is tantamount to interest (Riba).

If the business man is interested in deriving benefit from your business, then you may offer him a shareholding in your business by entering into a partnership with him without the condition of loan. (Al-Ikhtiyaar Li-Ta’leelil Mukhtaar 2/33)

Allah Ta’ala Knows Best

Mufti Ismaeel Bassa

themufti.com

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

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