A society giving loans on a fixed profit basis

13-7-2009 | IslamWeb

Question:

Assalamu Aleikum, Dear shaik please give me a detailed reply to the following question. We have a society they give loan to businessman on condition that at the end of three months they must give 1/3 of the profit and the loan.To grant the loan the socity demand gurantee of four members of that same society. In case the buseness incured a loss the gurenter will have to pay the loss if the businessman fails to pay.The value of the loan is known but the stock of the busines is not known at the time of starting the business. (as it is already running business).
Jazakamullah khair, may Almighty Allah make us benifit from your knoledge.
Answer:

All perfect praise be to Allaah, The Lord of the Worlds. I testify that there is none worthy of worship except Allaah, and that Muhammad sallallaahu `alayhi wa sallam ( may Allaah exalt his mention ) is His slave and Messenger.

 

If the situation is as you mentioned in the question that this society gives a loan in return for interest that the borrower pays, then this is a loan that brings a benefit. The rule that the jurists may Allaah have mercy upon them established is that every loan that draws benefit is Riba (interest and/or usury), therefore, this transaction is not permissible in principle. Consequently, it is not permissible for anyone to be a sponsor for the debtor.

For more benefit, please refer to Fataawa 90508 and 94668.

Allaah Knows best.

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