Is it permissible for the lender to stipulate to the borrower that the money be spent on specific investment or purchasing avenues, and what is the ruling on the borrower's failure to adhere to these conditions and spending the money on other legitimate avenues?

It is permissible for the funding entity of a project to stipulate to the borrower that the loan be used for specific projects, as long as the entity does not derive any benefit from this condition. The general rule is that conditions are valid unless they contradict Islamic law. The borrower must fulfill this condition, based on the words of Allah Almighty: "O you who have believed, fulfill [all] contracts," and the words of the Prophet, peace and blessings be upon him: "Muslims are bound by their conditions."