Is It Permissible to Set a Fixed Return on an Investment?

Answered by Shaykh Faraz A. Khan

Question: Are Fixed Returns Permissible?… such as the following scenario:

Person A says “Invest in me and I will double your money in 6 months”
Person B says “I will invest £100 pounds and then after 6 months I get £200 back
Person A says “Agreed”

Answer: Assalamu alaikum wa rahmatullah,

I pray this finds you in the best of health states.

Such an arrangement is impermissible since the return amount is fixed and therefore can (and often does) lead to dispute later if the investment does not profit enough to provide the specified return amount.

Rather, one can guarantee only a percentage of the profit, which is of course unknown, such as, “15% of the profit gained,” or the like. If there is no profit, there is no return on the investment. [Maydani, Lubab; Usmani, Introduction to Islamic Finance]

And Allah knows best.
wassalam
Faraz

Checked & Approved by Faraz Rabbani