What is the ruling on investing with a company that offers fixed returns (10%), or a company that offers variable returns (3%-5%), with both parties bearing losses in both cases?
The fundamental principle is that earning money must be lawful, as the Prophet, peace and blessings be upon him, said: "Indeed, Allah is good and accepts only what is good." This is also because unlawful earnings prevent prayers from being answered.
The contractual relationship mentioned is a فاسدة fasidah (corrupt/invalid) , because it stipulates a percentage of the capital as profit, or a fixed amount. The correct form of Mudarabah is that the profit should be a common share (a percentage) of the total profits, not of the capital. Therefore, it is not permissible for either party to stipulate a specific amount or a percentage of the capital, even if the percentage is variable.
Summary from Ftawy's records · added here
Reviewed by El Fatwa's sharia committee.
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- Summary from Ftawy's records, reviewed by El Fatwa's sharia committee.
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