Assalaamu alaykum Mufti
I had three questions inshaAllah:
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When assessing debt to total-assets ratio, I am assuming you only consider the interest liability in the calculation. E.g. If a company has assets of £100, loan payable of £60 (consisting of principal of £50 and unpaid interest of £10), the ratio will be 10/100 = 10%. Is this correct or should the ratio be 60%?
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On IFG’s “How to Purify Your Wealth” course, I noted this on the “Borrowing-fueled growth” slide:
“Another argument is that it is the company that makes the profit. Yes, it takes an interest bearing loan to achieve its objectives, and this is haram, but the fact that it is having to pay back interest, doesn’t itself
mean the activity of the company is haram (as it could have raised that same money from halal sources too and achieved the same profit) and therefore the profit itself is halal.”
I am in a tricky situation on one of my investments and wanted to know if this is an acceptable position held by any madhab or scholar?
- On the same course, I noted the following:
“My view is that a company can finance using sharia-compliant debt or conventional debt. Sharia-compliant debt will be marginally more expensive. Therefore, the difference the company will have in its profits will be the difference between what they would pay to an Islamic bank vs a conventional bank as
the return on the Islamic/conventional finance. So you would purify your percentage of the saving the company makes by going the haram finance route. In practice this would be negligible, given you’ll be
dealing with low-debt companies anyway, as you will have screened for that already.”
As above, is this held by any madhab or scholar? And was any quantitative research done to support the claim that sharia-compliant debt would be marginally more expensive?