✿ Written by: Saudi Fatwa Committee (Fatāwā)
❖ Ruling on Lending Money with a Profit-Sharing Condition
If a person gives money to another as a loan with the condition that he will receive half the profit from a business venture, then this is ḥarām (unlawful).
According to the scholars, there is a well-established principle:
“Every loan that brings a benefit is riba (interest).”
❖ The Permissible Alternative: Muḍārabah
It is permissible for someone to say:
“Take this money, engage in business with it, and the profit will be split—half yours and half mine.”
This is a valid Muḍārabah contract, and halāl.
❖ What’s the Difference?
Someone might ask:
“What’s the difference if I say: I am giving you 10,000 as a loan, and I want half the profit?”
Answer:
That is ḥarām, because:
- It is a loan, and the lender is guaranteeing repayment of 10,000
- In addition to that, he is benefiting from the profit
- Thus, the loan has generated gain, which is riba
In contrast, in Muḍārabah, the arrangement is:
“Here is 10,000. Use it in trade. Half the profit is yours.”
- In this case, no debt is established
- If the business suffers a loss or the capital is lost, the owner of the capital bears the loss, and the working partner’s effort is lost, not his wealth
- The working partner (muḍārib) is not liable for the capital
❖ Summary of the Difference
| Aspect | Loan with Profit Condition | Muḍārabah (Profit-Sharing Investment) |
|---|---|---|
| Type of Transaction | Loan | Partnership (Muḍārabah) |
| Repayment Obligation | Full amount guaranteed | Capital loss borne by investor |
| Profit Entitlement | Lender takes a share | Based on agreement |
| Ruling | Ḥarām (riba) | Ḥalāl (permissible) |
Reference:
Ibn ʿUthaymīn – Liqāʾ al-Bāb al-Maftūḥ, 9/169
