What is the ruling on investing a sum of money in a furniture factory in exchange for a fixed monthly profit of 1500 Riyals, with a guarantee of full capital recovery upon request? Is this considered usury (riba)?
For the validity of (profit-sharing partnership), the partner's share of the profit must be a common percentage, not a fixed amount; otherwise, the Mudarabah is void. Similarly, it is forbidden to stipulate that the worker guarantees the capital; rather, the guarantee is on the owner of the capital.
If the partnership is invalid due to the aforementioned conditions, it must be dissolved. In such a case, the entire profit belongs to the owner of the capital, and the factory owner is entitled to a fair wage (اجرة المثل) for his work. To correct it, an agreement must be reached on a known percentage of the profit, and it should not be stipulated that the factory owner guarantees the capital. A monthly amount can be taken on account, and then a settlement can be made upon liquidation.
As for the buyer appointing the seller as his agent to sell the commodity, it is permissible in principle, unless it is a stratagem for usury, such as when the buyer purchases cards on credit and the seller commits to selling them. This scenario is prohibited due to its resemblance to the forbidden 'Aynah (buy-back) transaction.
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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