Fixed return on investment

Investment Questions and Chats
#1

Assalamu alaikum

I have invested in a construction business run by a friend of my dad’s.

I receive a fixed amount of “profit” every month, this fixed amount was agreed by both parties at the time of investment, it is not based on a percentage of the profit but rather just a fixed pre agreed amount. There is however a share in the risk in that if the investment/project fails then it is of course understood I will not receive any profit and my capital could be lost

E.g. I have invested £30k, I receive a fixed amount of £350 every month for 12 months, then at the end of the 12 months my £30k is also returned to me

This is all a verbal agreement and without any official paperwork

Is this type of investment halal? As I believe some scholars quote ijma on the impermissibility of receiving a fixed amount on an investment like this, is this however more nuanced? Or is it outright haram? Or perhaps I’m mistaken?

Jazakumullaahu khairan and apologies for the long-winded question. Any guidance would be appreciated

#2

Wa alaykum salaam,

It all depends on the answers to the following:

  1. What have you gained in lieu of your investment? Equity? Or no equity?

  2. Are the returns a liability on the business or generated from sales?

  3. If the business goes bust, do you become a senior creditor? A shareholder?

The investment should be clear on what the money is being used for and what you are entitled to.

#3

jazaakAllaahu khairan shaykh for taking time out to get back to me. I’d like to sincerely apologise for the late reply, I was waiting on someone to provide the answers to your questions.

  1. Income receipts generated from property development rental/sales.

  2. Generated from sales.

  3. The investment is backed by property. At insolvency, treatment will be of a shareholder.

#4

Wa alaykum salaam,

Based your responses, if it is truly an equity-based investment, then it has the potential to be Shariah compliant if everything else is in order. The terms and conditions all need to be Shariah compliant.

Allah knows best

#5

جزاكم الله خيرا

I appreciate you taking your time out to respond to me.

#6

Would you advise me to withdraw my investment/end my investment once my contract has concluded?

In the meantime, would you say it is ok for me to use/benefit from the profits I am receiving?

بارك الله فيكم