What is the difference between riba and mudarabah?
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The questioner : Shaykh, what is called bank interest on investment, not on loans, where you deposit an amount in the bank and it yields you a ten percent profit?
The Shaykh : The hadith of the lie, O mother of 'Umar, and it is all riba.The questioner : What is the similarity between it and riba, O Shaykh?The Shaykh : It is riba, my brother.
The questioner : A person invests it, meaning he starts a project, for example, and gives you a percentage of the profits.
The Shaykh : A specific percentage? First, what is this percentage? Second, what is the work he is doing? All of this must be clarified. This is called mudarabah. For example, you have capital and I have effort and work, so you give me this money, and I work with it and trade with it. We agree that half is for us and half is for you, or a quarter for me and three quarters for you, and so on. However, a fixed percentage, whether in profit or loss, is not permissible. That is gambling.
The questioner : The evidence, meaning?
The Shaykh : What do you have to do with the evidence now? May Allah guide you. The issue is clear. Riba is forbidden by the Book, the Sunnah, and the consensus of the Ummah. So any matter that deviates from the Shari'ah rules is not permissible. It is either riba or haram illicit gain.
The questioner : Now, I agreed with a person to utilize my money for a specific profit, like half for him and half for me. If the money is lost now, who bears the loss, me or him?
The Shaykh : If you are the owner of the money and he is the one providing the effort.
The Shaykh : The hadith of the lie, O mother of 'Umar, and it is all riba.The questioner : What is the similarity between it and riba, O Shaykh?The Shaykh : It is riba, my brother.
The questioner : A person invests it, meaning he starts a project, for example, and gives you a percentage of the profits.
The Shaykh : A specific percentage? First, what is this percentage? Second, what is the work he is doing? All of this must be clarified. This is called mudarabah. For example, you have capital and I have effort and work, so you give me this money, and I work with it and trade with it. We agree that half is for us and half is for you, or a quarter for me and three quarters for you, and so on. However, a fixed percentage, whether in profit or loss, is not permissible. That is gambling.
The questioner : The evidence, meaning?
The Shaykh : What do you have to do with the evidence now? May Allah guide you. The issue is clear. Riba is forbidden by the Book, the Sunnah, and the consensus of the Ummah. So any matter that deviates from the Shari'ah rules is not permissible. It is either riba or haram illicit gain.
The questioner : Now, I agreed with a person to utilize my money for a specific profit, like half for him and half for me. If the money is lost now, who bears the loss, me or him?
The Shaykh : If you are the owner of the money and he is the one providing the effort.