Question
A brother wants to invest ‘(for example $5000) in a business, and the one receiving the $5000 says I will return your 5000, plus $2000 in a period of 1 year.
The lender and borrower both agree on the terms of $5000 + $2000 return.
My question is, is that extra $2000 haraam ?
Answer
In the Name of Allah, the Most Gracious, the Most Merciful.
As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.
The initial amount $5000 is a loan forwarded to the borrower. Any surplus return on a loan is Riba and completely impermissible.
A Sharī῾ah Compliant alternative is through Mudārabah Contract. Please read through the detail guideline on the Mudharabah contract at: http://daruliftaa.net/sharcompliancy/Download-document/Mudarabah-Agreement.html
Also read detail guidelines on both Musharakah Partnership and Mudarabah Partnership at :http://daruliftaa.net/sharcompliancy/Download-document/Musharakah-and-Mudarabah-Excerpt-from-Introduction-to-Finance.html
And Allah Ta’āla Knows Best
Mawlana Faisal bin Abdul Hameed,
Student Darul Iftaa
Montréal, Canada
Checked and Approved by,
Mufti Ebrahim Desai.