Profit is shared, not the capital

Shaykh Bali has stated four conditions for a lawful investment. If even one is wrong, the profit no longer remains halal.

How the mistake begins

The money was placed in a businessman's hands — he would put it to work in his business and give a share of the profit. Along with it, a deposit receipt was taken, "for security."

For several years profit came in, and the relationship stayed good too. Then once the market price fell, and a loss occurred.

The owner took out the receipt and said — give me back my full money. The businessman became afraid and left the country altogether.

Shaykh Bali says the mistake was not made on the day of the loss — the mistake was made on the very first day of the contract.

The Shaykh's answer

It is permissible to fix a specific share of the profit — half, a third, 10%. But fixing a percentage of the capital is suht and haram.

The Shaykh says — "Take one lakh, and at the end of the year you will give 10% of that one lakh" — this is not permissible, because that amount is known in advance, whether there is profit or loss. It must be said — "10% of the profit on one lakh." Only then is it a valid mudarabah.

The remaining conditions: the capital must be specified and in cash — not a debt stuck with someone; the share of profit for the one who works must be fixed as a percentage; and the loss is entirely on the owner of the capital, unless the businessman has been negligent.

Evidence — the weight of conditions

الْمُسْلِمُونَ عَلَى شُرُوطِهِمْ، إِلَّا شَرْطًا حَرَّمَ حَلَالًا أَوْ أَحَلَّ حَرَامًا

Muslims are bound by their conditions — except a condition that makes the halal haram or the haram halal. (Sunan Abu Dawud and Tirmidhi; the hadith is sahih)Copy

Allah has said — O you who believe, fulfil your contracts (Surah Al-Ma'idah, verse 1). The Shaykh says, therefore, taking a deposit receipt in a mudarabah is invalid — that money is neither a loan nor a deposit with him.

What to do

1. Make a written contract — clearly write the amount, the field of business, the share of profit and the rules for loss.
2. Write the share of profit as a percentage — not a percentage of the capital.
3. Not a deposit receipt; keep two witnesses, and if needed, appoint a trustworthy arbitrator.
4. If a loss occurs, first verify the cause — unless negligence is proven, the liability is on the owner of the capital.

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Source: Based on a talk by Shaykh Wahid Abdussalam Bali

Translation and compilation: Raqi Faisal Ahmed Sabit — Al Qur'an Ruqyah Healing Center