Is it permissible to convert a loan into a Mudarabah (profit-sharing partnership) with retroactive effect, covering the loan period, with the understanding that profit and loss for that period will be borne, given that the original capital was Mudarabah and then converted into a loan?

If the two parties agree to terminate the mudarabah (profit-sharing partnership) and convert the money into a loan for one year, it is thereafter not permissible to consider this loan as a mudarabah or to stipulate an increase on it, because that is usury (riba), whether the condition was made at the beginning of the loan, during its term, or upon its maturity.

It is also not permissible to include this debt in a new mudarabah; because a condition for mudarabah and partnerships in general is the presence of the capital. Therefore, it is not valid for the capital to be a debt; rather, it must be a tangible and present asset.