Shari’ah-Compliant Investment
QUESTION:
An opportunity to invest has arisen. Kindly find the details of the proposed investment below:
• I am required to invest an amount of R1 000 000.00 into a private company for the purpose of business expansion.
• The investment term is 5 years.
• The capital will be repaid at a fixed rate of R200 000.00 per annum over the 5-year period.
In addition to the capital repayment, a “profit” is structured as follows:
• Year 1: 5% of R1 000 000.00 = R50 000.00
• Year 2: 5% of R800 000.00 = R40 000.00
• Year 3: 5% of R600 000.00 = R30 000.00
• Year 4: 5% of R400 000.00 = R20 000.00
• Year 5: 5% of R200 000.00 = R10 000.00
The percentage return (5%) remains fixed throughout the investment period, while the capital reduces annually through repayment.
From my understanding, this appears to resemble a loan arrangement with a fixed return linked to the outstanding capital.
1. Is this investment structure permissible in Shariah, or does it fall under impermissible Riba due to the fixed return?
2. If it is not permissible, what alternative, Shariah-compliant structures would you recommend (e.g. Musharakah, Mudarabah, or any other model) that would be fair and beneficial to both parties?
3. How can such an agreement be restructured to ensure compliance while still allowing for capital recovery and a reasonable profit?
ANSWER:
1. The partnership structure cited in the query is impermissible. Neither of the partners can fix a profit in the partnership as stipulated in the partnership structure.
2. Yes, you may enter in to a Musharakah contract and fix a percentage for each partner. For example, Partner 1 may receive 60% and Partner 2 may receive 40% based on their contribution to the capital.
(وَمِنْهَا) : أَنْ يَكُونَ الرِّبْحُ مَعْلُومَ الْقَدْرِ، فَإِنْ كَانَ مَجْهُولًا تَفْسُدُ الشَّرِكَةُ؛ لِأَنَّ الرِّبْحَ هُوَ الْمَعْقُودُ عَلَيْهِ، وَجَهَالَتُهُ تُوجِبُ فَسَادَ الْعَقْدِ كَمَا فِي الْبَيْعِ وَالْإِجَارَةِ.
(وَمِنْهَا) : أَنْ يَكُونَ الرِّبْحُ جُزْءًا شَائِعًا فِي الْجُمْلَةِ، لَا مُعَيَّنًا، فَإِنْ عَيَّنَا عَشَرَةً، أَوْ مِائَةً، أَوْ نَحْوَ ذَلِكَ كَانَتْ الشَّرِكَةُ فَاسِدَةً؛ لِأَنَّ الْعَقْدَ يَقْتَضِي تَحَقُّقَ الشَّرِكَةِ فِي الرِّبْحِ وَالتَّعْيِينُ يَقْطَعُ الشَّرِكَةَ لِجَوَازِ أَنْ لَا يَحْصُلَ مِنْ الرِّبْحِ إلَّا الْقَدْرُ الْمُعَيَّنُ لِأَحَدِهِمَا، فَلَا يَتَحَقَّقُ الشَّرِكَةُ فِي الرِّبْحِ
(بدائع الصنائع 59/6)
ALLAH TA’ALA ALONE IN HIS INFINITE KNOWLEDGE KNOWS BEST!
ANSWERED BY:
Mufti Abdul Kader Fazlani
Date: 03 Dhul Qa’dah 1447 / 21 April 2026
CHECKED AND APPROVED BY:
Mufti Yacoob Vally Saheb