Profit on a loan

Question

Question: Zayd gave Bakr a sum of four thousand rupees for trade and said: “Whether you make a profit or a loss with this money, in any case keep giving me forty rupees a month as profit; all the remaining profit, however much it may be, is yours, and my sum will remain mine; whatever loss there is, you will have to bear it all.” What is the ruling of the pure Sharia in such a case? Is this transaction permissible with this condition?

Answer

Dealing in this way is not permissible according to the Sharia; this is interest (riba), and Allah Most High has declared interest unlawful: [ar]أَحَلَّ ٱللَّهُ ٱلْبَيْعَ وَحَرَّمَ ٱلرِّبَوٰا۟ (الآية)[/ar] “…Allah has made trade lawful and has forbidden riba…” (Surah al-Baqara, 2:275).

Source: Fatawa Mahmudiyya

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