The Objectivity of the ... Date Added: 14-02-2024

Methods of Prevention and ... Date Added: 13-02-2024

What is Recommended for the ... Date Added: 12-02-2024

The Prophetic Guidance in ... Date Added: 11-02-2024

Allah Intends every ... Date Added: 21-02-2024

The Precious Jewel: ... Date Added: 20-02-2024

Why do we Celebrate Prophet ... Date Added: 18-02-2024

Some Etiquettes of Dua` and ... Date Added: 15-02-2024

Search Fatawaa

Subject : Guidelines for Trade through Mudarabah

Fatwa Number : 3803

Date : 17-09-2023

Classified : Partnership in Business

Fatwa Type : Search Fatawaa

Question :

My brother has a car dealership, and I provide him with money to use in trading cars, by cash and by installments. In return, he gives me a share of the profit. Is this transaction haram (unlawful)?

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 arrangement mentioned in the question is a type of Mudarabah contract. A Mudarabah contract involves one party providing capital (in this case, you providing money) to another person (your brother) for them to conduct business, and the profit is shared according to an agreed-upon ratio. Sheikh al-Islam Ibn Hajar al-Haytami defined the Mudarabah contract as follows: "It is a contract that authorizes the other owner to trade with the provided capital, and the profit is shared between them" [Tuhfat al-Muhtaj, Vol. 6, Page 82].

In the distribution of profits in a Mudarabah contract, it is a requirement that the profit is shared jointly from the total profit. It is not permissible for the provider of capital and the working partner to agree on a fixed amount for one of them, as this would guarantee the capital of the Mudarabah. Similarly, they cannot agree on a percentage of the provided capital, such as if the financier gives the working partner one hundred thousand dinars and they agree on a profit of one-third of the capital. This would be considered a fixed profit, and instead, the profit for both the capital provider and the working partner must be a share of the actual profit generated.

Therefore, if the profit is distributed based on the agreed-upon percentage of the actual profit generated from the operation of the Mudarabah capital, it is permissible in Islamic law. However, if the profit is tied to the amount paid with a guarantee of the capital, it would fall under prohibited riba. And Allah the Almighty knows best.



Name *

E. mail Address *


Comment Title *

Comment *


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.