Is It Permissible in a Business Where One Partner Takes the Risk of Loss?
Hanafi Fiqh
Answered by Mawlana Ilyas Patel
Question
Is it permissible to do a business deal where partner(s) B will work with you and also provide some funds XY to both cater for the business and your needs as a debt, but on the condition that your agreed profit shares will not be taken by either party till the previous debt XY is covered and then everyone gets their profit share for the business. Also, in case of loss, the partner(s) B takes the risk per their agreement.
Answer
In the Name of Allah, the Most Merciful and Compassionate.
I pray you are in good faith and health. Thank you for your question.
The initial investment of the partner and covering the debt before the profit share is fine. However, partner B taking the risk of loss is not permissible. It has to be shared between the partners.
The basis of a partnership is profit-loss sharing, where a profit ratio is determined for each partner in proportion to the actual profit accrued. Whether such a ratio of profit needs to be proportionate with the percentage of capital invested by a partner is the subject of disagreement between scholars, with some stating that it must and others saying it does not have to.
However, all the scholars agree that in the case of loss, all partners shall suffer based on their ratio of investment, no less and no more. [Usmani, Introduction to Islamic Finance, Fiqh al-Buyu’]
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Wassalam,[Mawlana] Ilyas Patel
Checked and Approved by Shaykh Faraz Rabbani
Mawlana Ilyas Patel is a traditionally trained scholar who has studied in the UK, India, Pakistan, Syria, Jordan, and Turkey. He started his early education in the UK. He went on to complete the hifz of the Quran in India, then enrolled in an Islamic seminary in the UK, where he studied the secular and ‘Aalimiyya sciences. He then traveled to Karachi, Pakistan. He has been an Imam in Rep of Ireland for several years. He has taught hifz of the Quran, Tajwid, Fiqh, and many other Islamic sciences to children and adults onsite and online extensively in the UK and Ireland. He taught at a local Islamic seminary for 12 years in the UK, where he was a librarian and a teacher of Islamic sciences. He currently resides in the UK with his wife. His interest is a love of books and gardening.
