Islamic Law Regarding Acceptable Invẹstmẹ́nt

[Suyuti]

The following requirements must be met in order to invest money in profit-sharing schemes and with businesses that operate in this industry:

1. If the requirements for immediate exchange are fulfilled when selling gold for cash or silver, and if the requirement that the exchange be completed immediately in equal amounts when selling gold for gold, the company will engage in legal activities, including selling gold.

2. Unless the business has gone too far or been careless, the capital should not be guaranteed, so it should not promise to return the capital in the event of a loss. This is because this transaction is actually a loan if the capital is guaranteed in every situation, and any benefits it provides are considered Riba.

3. Although it should be defined as a percentage of the profits rather than the capital, the profit should be known and agreed upon. For instance, one partner might get a third, half, or twenty percent of the profits, with the other partner receiving the remaining portion.

If the profit is defined as a specific sum, as a percentage of the capital, or as unknown and undefined, the contract is void. According to Islamic jurists, in these situations, this kind of partnership is void.

May Allah grant him mercy, Ibn Al-Mundhir stated:

"All of the scholars from whom we acquired knowledge have agreed that a (profit-sharing) partnership becomes invalid if one or both parties stipulate that he will receive a specific amount of money . Among those from whom we learned that are Malik, Al-Awza`i, Ash-Shafa`i, Abu Thawr and Ashab Ar-ra'y." (Al-Mughni 5/23).

It says in Matalib Uli'n-Nuha (3/517):

"If he says: Take this (money) and do business with it, and you will have a portion of the profit, or you will be a partner in the profit, or you will have something of the profit, or a share of the profit, that is not valid because it is unknown, and a profit-sharing partnership is not valid if the shares of profit are unknown."

It is acceptable to interfere if these requirements are satisfied.

Source: IslamQA