Question :

A financial institution has offered to grant a loan to a factory against using the machines or the expansion of the latter as collateral. By virtue of this agreement, the institution becomes a partner entitled to 25% of the profits. In case no profits were made or loss took place, the institution recovers the original amount of the loan. What is the ruling of Sharia on this contract?

The Answer :

All perfect praise be to Allah the Lord of the Worlds. May His peace and blessings be upon our Prophet Mohammad and upon all his family and companions.

The form of the above transaction is similar to usurious loans and calling it "Partnership" doesn`t make it otherwise since stipulating a benefit in a loan contract makes it a contract of usury.

 Al-Imam Al-Ramli (May Allah have mercy on him) stated: " {Among the types of usury} is loan usury where a benefit is stipulated in favor of the lender." {Nehayat Al-Mohtaaj, V.3:P.424}.

In conclusion, it isn`t permissible to stipulate receiving a percentage of the profits in a loan to avoid usury.

It is recommended to change the form of the above loan contract into a partnership whereby each party becomes entitled to profits and endures loss according to its share in the capital. And Allah the Almighty knows best. 

 

Comments

Name *

E. mail Address **

Country --- Select Country --- Afghanistan Albania Algeria Andorra Angola Antigua and Barbuda Argentina Armenia Australia Austria Azerbaijan Bahamas Bahrain Bangladesh Barbados Belarus Belgium Belize Benin Bhutan Bolivia Bosnia and Herzegovina Botswana Brazil Brunei Darussalam Bulgaria Burkina Faso Burundi Cambodia Cameroon Canada Cape Verde Central African Republic Chad Chile China Colombia Comoros Congo Congo Costa Rica Côte d'Ivoire Croatia Cuba Cyprus Czech Republic Denmark Djibouti Dominica Dominican Ecuador Egypt El Salvador Equatorial Guinea Eritrea Estonia Ethiopia Fiji Finland France Gabon Gambia Georgia Germany Ghana Greece Grenada Guatemala Guinea Guinea-Bissau Guyana Haiti Holland Honduras Hungary Iceland India Indonesia Iran Iraq Ireland Israel Italy Jamaica Japan Jordan Kazakhstan Kenya Kiribati Korea Kuwait Kyrgyzstan Latvia Lebanon Lesotho Liberia Libyan Arab Jamahiriya Liechtenstein Lithuania Luxembourg Madagascar Malawi Malaysia Maldives Mali Malta Marshall Islands Mauritania Mauritius Mexico Micronesia Moldova Monaco Mongolia Montenegro Morocco Mozambique Myanmar Namibia Nauru Nepal Netherlands New Zealand Nicaragua Niger Nigeria Norway Oman Pakistan Palau Panama Papua New Guinea Paraguay Peru Philippines Poland Portugal Qatar Republic of Korea Romania Russia Rwanda Saint Kitts and Nevis Saint Lucia Samoa San Marino Sao Tome and Principe Saudi Arabia Senegal Serbia Seychelles Sierra Leone Singapore Slovakia Slovenia Solomon Islands Somalia South Africa Spain Sri Lanka Sudan Suriname Swaziland Sweden Switzerland Syrian Arab Republic Tajikistan Tanzania Thailand Timor-Leste Togo Tonga Trinidad and Tobago Tunisia Turkey Turkmenistan Tuvalu Uganda Ukraine United Arab Emirates United Kingdom United States of America Uruguay Uzbekistan Vanuatu Vatican Venezuela Viet Nam Yemen Zambia Zimbabwe

Comment Title *

Comment *

Enter the number shown on the image

*

Warning: this window is not dedicated to receive religious questions, but to comment on topics published for the benefit of the site administrators—and not for publication. We are pleased to receive religious questions in the section "Send Your Question". So we apologize to readers for not answering any questions through this window of "Comments" for the sake of work organization. Thank you.