All praise be to Allah, peace and blessings upon our Prophet Mohammad.
If the charity is a Zakah (obligatory charity), then it is impermissible for the proxy to use it in trade because doing so entails postponing its payment which is an immediate obligation when there are eligible recipients for it. Also, using charity funds in trade could lead to losing them, and thus the proxy is obliged to guarantee these funds. Al-Imam Ibn Hajar Al-Haitami (May Allah have mercy on his soul) said : “Paying the Zakah is due immediately after one lunar year had passed so that the eligible recipients could make use of it…….If he delayed paying it, then he is considered sinful and is obliged to guarantee it.” [Tohfatt Al-Mohtajj”{3/343}].
A proxy here is like the original giver of Zakah. However, if the charity wasn`t a Zakah, then the ruling is different where it can be invested in trade and the like provided that the proxy guarantees these funds against transgression and failure to keep them safe. The permission of the original giver of charity (donor) is to be sought before using the money for investment since his condition is tantamount to that of the Waqif (endowment founder). And Allah, The Exalted Knows Best.
