Question

Salam, I have a friend (non-believer) who raises capital to buy properties, renovate and then sell on for a profit which is distributed back to the investors. In order to raise capital, the developer does this through a combination of investments from general fundraising and a bridging loan from a bank to make up any shortfall in purchasing the full property. Is this permissible to invest in as an ordinary investor as I would have no involvement with any loans just my own investment?

Answer

If you are just providing capital as an investment then it will be permissible for you to invest in your friend’s business venture provided that you have no involvement with the loan transaction at all. This means that your friend takes out the loan in his own name or someone else’s name, not yours, and he takes full responsibility to pay back the loan and any interest that he has accrues.

On the other hand if your friend is taking out the loan from the bank on behalf of the investors and each investor will have some liability in paying back that loan and interest from their share of the profits then it will not be permissible to engage in this business venture.

Answered by:
Ifta Research Fellow

Checked & Approved by:
Mufti Abdul Rahman Mangera
Mufti Zubair Patel