What is the ruling on a profit-sharing partnership (mudarabah)?

The questioner : Please. Peace be upon you.

The Shaykh : And upon you be peace.

The questioner : A question over the phone? Yes, indeed. O Shaykh, my brother, I am asking you. Yes, I have a man who asked me for money, and I said to him, “I am imposing a condition on you.”

The Shaykh : Did you ask for money as a loan or as a debt?

The questioner : No, a loan, but he wants to work with it. All right. I said to him, “I want ten percent of the thousand.” What is your opinion, Honorable Shaykh?

The Shaykh : If you said this and he agreed, it becomes merchandise.

The questioner : Yes, yes, he agreed.

The Shaykh : It becomes merchandise.

The questioner : Meaning there is no riba (usury or interest) and nothing else?

The Shaykh : There is no riba, because this money is not in the worker’s liability. If this money is lost, it is on you, and he owes nothing.

The questioner : He just wants to work with it.

The Shaykh : I understand, but did he take it as a loan or as merchandise for a profit-sharing partnership?

The questioner : No, he wants to work with it as a loan, meaning he wants to work with it and return it after a day or two.

The Shaykh : Look, this falls into two categories. Sometimes you say, “This is fifty thousand as a loan; he takes it, works with it, and the profit is all his.” Sometimes you say, “O so-and-so, this is fifty thousand; trade with it, and the profit is between us.”

The questioner : Yes, I told you that is what I said.

The Shaykh : This, this does not contradict.

The questioner : There is nothing wrong with it, right?

The Shaykh : This is a profit-sharing partnership (mudarabah).

The questioner : May Allah bless you.

The Shaykh : But if the money is lost, it is on you, and he owes nothing. Welcome.

The presenter : May Allah reward you with good.