Question Summary:
Investor demands 5% as interest but we would like to pay back 25% profits instead?

Question Detail:

Investor demands 5% as interest but we would like to pay back 25% profits instead?
We are a constructions firm and work along with investors. One such investor wants to invests with us say about INR 1cr for a lock in period of 5years but wants profits of 5% every year of the total amount invested. But our firm wants to pay profits of 25% to investor and 75% to the firm which may work more than 5%. Need your detailed assistance as to how we should convince the investor to do business the Islamic way

Answer :

In the Name of Allah, the Most Gracious, the Most Merciful.
As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.
Islam is a complete way of life. As Muslims we are not only bound to the commands of Allah in matters of worship, but even in our social, business, political, etc. affairs we adhere to the dictates of the Shariah. The Sunnah of our Master, Muhammad salla Allahu ‘alaihi wa sallam, sheds light on every aspect of our lives. Every Muslim can find a perfect example in his life.
One aspect of life Shariah has given particular importance to is business dealings. Trade and transactions are undoubtedly a human need. A community as a whole may easily fulfill its needs by transacting between one another. Certain individuals may even prosper through their acumen and intelligence. However, as beneficial as business is, when coupled with greed and injustice, it leads to a general economic decline in a community.
In reference to the particular scenario in the query, if the investor invested in a construction firm, he will be entitled to a percentage of the profit according to mutual agreement. For example, 25% of the profit. If there are losses then an investor will share the loss according to his capital contribution. It is incorrect to base the return in an investment on a percentage of the capital investment as that is tantamount to saying “Give me Rs 5000 upon Rs 1 lakh.” As such, the capital will be a loan and the Rs 5000 will be ribā’ (interest), which is haram.
الَّذِينَ يَأْكُلُونَ الرِّبَا لَا يَقُومُونَ إِلَّا كَمَا يَقُومُ الَّذِي يَتَخَبَّطُهُ الشَّيْطَانُ مِنَ الْمَسِّ (البقرة: ٢٧٥) 
Those who consume interest will not stand (on the Day of Judgment) except like the one who has been driven mad by the touch of Shaitan (Al Baqarah: 275)
It is sufficient a reason for a Muslim to stay away from something that the Shariah has prohibited it.
عن أبي هريرة، قال: قال رسول الله صلى الله عليه وسلم: " أيها الناس، إن الله طيب لا يقبل إلا طيبا، وإن الله أمر المؤمنين بما أمر به المرسلين، فقال: {يا أيها الرسل كلوا من الطيبات واعملوا صالحا، إني بما تعملون عليم} وقال: {يا أيها الذين آمنوا كلوا من طيبات ما رزقناكم} ثم ذكر الرجل يطيل السفر أشعث أغبر، يمد يديه إلى السماء، يا رب، يا رب، ومطعمه حرام، ومشربه حرام، وملبسه حرام، وغذي بالحرام، فأنى يستجاب لذلك؟ " (رواه مسلم، باب قبول الصدقة من الكسب الطيب)
Sayyidina Abu Hurairah reports from Rasûlullâh salla Allahu ‘alaihi wa sallam: “Verily, Allah is most pure, and He only accepts that which is pure. Verily, He instructs the believers that which He commanded the Ambiyâ . Thus Allah said: ‘O messengers! Eat of pure and Halâl sustenance and do virtuous and righteous deeds.’ He also says: ‘O you who believe, eat from that which is pure and Halâl of what We have provided you.” Thereafter Rasûlullâh salla Allahu ‘alaihi wa sallam illustrated this by means of an example where a person is undertaking a long journey. His hair is dishevelled and body full of dust. He then lifts his hands towards the skies and says ‘O my sustainer’ but his food is Harâm, his drinking is of Harâm means and he is thus nourished by Harâm, then how can such a person’s Du’â be accepted? (Muslim)
 
‘Ulamā’ have gathered a few harms of unlawful livelihood:
1. A person’s earnings will be unlawful. 
2. Such earnings will be devoid of barakât (blessings).
3. The business incurs the anger of Allah.
4. The body will be nourished with Harâm.
5. The noor of the heart will disappear.
 
6. The actions done by the body will be incorrect.
7. A person will be living under the influence of Shaitân constantly and thus will become rebellious to the orders of Allâh (This is prevalent today).
8. Earnings will have no barakât. Even if the entire family tire themselves in the earning of this wealth, there will be constant deficits in their income.
9. One’s Ibâdât will not be accepted.
10. Du’âs will be rejected.
11. Charity and Zakât will go unrewarded.
12. Travelling towards Haj will go unrewarded and one will remain unaffected in such sacred and Holy places.
13. It will cause a person to be thrown headlong into Jahannum.
14. The entire social system will be tainted, corruption will set and disunity will be the order of the day.
15. The enjoyment and love for doing Ibâdat will vanish and Ibâdat will be reduced to a mere routine and the inner sweetness will disappear.
16. Wealth earned in the displeasure of Allâh I will often be spent in the displeasure of Allâh I e.g. gambling, buying Harâm items etc.
And Allah Ta’āla Knows Best
Hisham Dawood
Student Darul Iftaa
Chicago, USA
Checked and Approved by,
Mufti Ebrahim Desai.