What is the ruling of Islamic law on investing a sum of money in a dairy and vegetable company with a fixed monthly profit margin of 5%? And does specifying the percentage entail a suspicion of usury (riba) or impermissibility?
If the capital is not guaranteed and is subject to reduction in case of loss, and the profit is 5% attributed to the company's profits and not to the capital, then there is no harm in this transaction, and it is a valid (profit-sharing partnership).
However, if the capital is guaranteed and the company undertakes to return it in full, then this is a loan contract, and any interest derived from it is usury (riba).
Regarding profit, there are three scenarios: 1. If its distribution is not specified between the worker and the capital owner, then the Mudarabah is invalid. 2. If it is a specific percentage of the company's profits (such as 5% or 10%), and if there is no profit, the capital owner receives nothing, and if a loss occurs, it is borne by his capital. This is permissible. 3. If the profit percentage is a fixed amount from the capital (like 5% annually), then this is forbidden usury (riba).
Summary from Ftawy's records · added here
Reviewed by El Fatwa's sharia committee.
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