Me and my partner own a dental practice in Irlam. We overpaid for it a few years ago because of prices at the time. My partners uncle funded half of it and since then it’s been a bit of struggle giving him profits as he is expecting around a 10% return. As a result my partner is actually paying out of his own pocket to keep him happy. The problem is that as we cannot invest back in the practice we are struggle to grow and that just means profits are getting hit even more. Because the grief my partner gets he can’t get out of it. To me that’s not even true Islamic finance and is more oppressive than conventional finance. If we were to get conventional finance we would be able to grow the asset and pay off the loan as well to eventually own the asset ourselves.
May Allah bless you.
I am sorry, but can you clarify what is the question you wanted to ask?
My question is would going for conventional finance be permissible in this situation?
May Allah bless you.
First of all, what we call “Islamic finance”, refers to investing and trading methods that are free from prohibited (haram) elements such as interests, deception, excessive uncertainty etc. We are instructed to stay away from these things, primarily to please our Lord. The wisdom in their prohibition is to help establishing justice and honesty within society.
This does not mean that our trades or investments will always be profitable.
If something is not working for us, it doesn’t mean we have to look for solutions from haram alternatives. Using haram means should always be at a very last resort, and for a short period of time.
Secondly, I believe that the agreement between you, your partner and your uncle, does not seem to be shariah compliant at all. If this is the case, we must first rectify this arrangement, and make it halal as a potential solution to the problem. For that, I would need to know details of the agreement if you can provide them.
Thirdly, if you still believe that conventional finance is the only solution available to you, then speak to a local scholar about your situation in details. He/she will be able to advice you further on whether it is permissible or not inshAllah.
And Allah knows best!
I have been thinking about this for a long time.
The profit and loss aspect I understand. The problem lies in that most people who have large amounts of capital will not be happy investing in a dental practice as the return is never going to be attractive enough.
Just an example of our practice a 500,000 investment is returning a investment of 5-10% a year.
Unless a dentist has very wealth parents there is no way they can buy a practice outright, alternative is get an investor. Now the problem is to grow a practice the dentist needs to continue to invest in the practice for it in order to increase profitability. Even if the dentist works really hard to improve the practice and pays out of his own pocket the investor is the one who will benefit the most.
Compare to this conventional finance where the dentist knows what the fixed outlay is, can plan for that work hard, whatever he invests , he knows in the end he will benefit in the end by growing the business as his hard work profits him rather than the bank.
So with the bank route there seems to be a fairer result. I have heard both Sheikh Akram Nadwi’s and Sheikh Judai’s opinion on this hence why I have been in a dilemma for a long time. Alhamdolillah upto now I havent gone to a conventional bank, but I feel like in the long term a person who goes down the route of getting a private investor will always be in a worse position.
I think it is such a complex scenario I would like to sit and discuss this with you if possible so I can get my head around this topic and clear all the questions in my head.