Question Summary:
Taking an Interest bearing loan on behalf of a client. Question Detail:
A businessman takes a loan from the bank to purchase stock. It is agreed with the customer that the loan is taken to obtain stock for their order and they agree to pay the cost, agreed profit and bank interest. Is this Shari’ah compliant?
Answer :
In the Name of Allah, the Most Gracious, the Most Merciful.
As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.
The transaction you have mentioned is not permissible due to two reasons:
Shari’ah is averse to Ribā (Interest) and any type of affiliation with it whatsoever. Stern warnings have been issued in the Ahādīth against those who are in any way connected to Ribā (Interest). It has been stated in a Hadīth:
«لَعَنَ رَسُولُ اللهِ صَلَّى اللهُ عَلَيْهِ وَسَلَّمَ آكِلَ الرِّبَا، وَمُؤْكِلَهُ، وَكَاتِبَهُ، وَشَاهِدَيْهِ»، وَقَالَ: «هُمْ سَوَاءٌ»[1]
“The Messenger of Allah (sallallahu alaihi wa sallam) cursed the consumer of interest, he who fed it (to others), its two witnesses and him who recorded it.”
Therefore, the procurement of an Interest bearing loan for oneself or on behalf of somebody else is not permitted.
The sale of an item is not permissible until it is in one’s possession. Therefore, enacting the transaction before procuring the stock will not be permissible.
However, you may consider going into a Shari’ah compliant Mudharabah partnership with somebody who is interested in investing his money. In brief, this is a partnership wherein one partner provides capital to another for commercial investment with only the second partner being responsible for management and work. Profits are shared at an agreed ratio. Loss is suffered only by the investor except in the scenario where the other partner is negligent in running the business.
And Allah Ta’āla Knows Best
Nabeel Valli
Student Darul Iftaa
Lusaka, Zambia
Checked and Approved by,
Mufti Ebrahim Desai.
www.daruliftaa.net
[1] صحيح مسلم، باب لعن آكل الربي ومؤكله
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