Is it permissible for an investor, investing other people's money, to keep 20% of the profits while giving 80% to the owners, and in case of a loss, the loss is divided 50% for each party? If not, what is the legitimate formula according to Islamic law?
The investor in other people's money: 1. If he participates with his effort only (as a mudarib agent): Profit: According to the agreement (e.g., 20%). Loss: The capital owner bears the entire loss, and the agent loses his effort, unless the loss was due to his negligence or transgression. Stipulating that the agent bears part of the loss is void, but the contract remains valid according to the majority of scholars. 2. If he participates with his money and effort: Profit: According to the agreement. Loss: Is proportionate to the capital (e.g., if he owns one-tenth of the money, he bears one-tenth of the loss).
Evidence for this: Ibn Qudamah said: "Loss in partnership is borne by each partner in proportion to his capital, whereas in , it is borne by the capital alone; the agent bears nothing of it." He also said: "The condition that the mudarib guarantees the capital or bears part of the loss is void, but the contract remains valid."
Summary from Ftawy's records · added here
Reviewed by El Fatwa's sharia committee.
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