Is My Profit Permissible if My Partner Uses Riba-Based Loans?

Answered by Shaykh Muhammad Carr

Question

I invested in a relative’s pesticide company, receiving 40% of the profit from my capital every six months while the company kept 60%.

However, the company takes riba-based loans. For instance, if the total capital is $100—$40 from investments (including mine) and $60 from a bank loan—my share of the profit corresponds to my investment.

Although I’m not directly involved with riba, is my profit still impermissible?

Answer

In the Name of Allah, the Most Merciful and Compassionate.

I pray you are in good faith and health. May Allah reward you for ensuring your sustenance (rizq) is permissible.

Giving and receiving interest is decisively impermissible in Islam. Allah says,

“O believers! Fear Allah, and give up outstanding interest if you are (true) believers. If you do not, then beware of a war with Allah and His Messenger! But if you repent, you may retain your principal—neither inflicting nor suffering harm.” [Quran, 2:278-279]

While your contribution is permissible, it becomes tainted when mixed with funds from a usurious loan. Consequently, the partnership is rendered invalid according to Islamic Law.

You are entitled to the balance after paying a wage for the work done on your capital by the working partner.

Proof

Imam Shirazi says:

“It is not permissible to engage in a transaction with someone known to have all of their wealth from unlawful sources.” [Shirazi, al-Muhadhdhab]

It is mentioned in Hashiyat al-Qalyubi:

“Partnership is valid even if it is disliked, such as a partnership with a non-Muslim subject (dhimmi), an interest-eater, and someone whose wealth is mostly unlawful.”

If the wealth is wholly unlawful, the partnership is impermissible.

And with Allah alone is our success.
[Shaykh] Muhammad Carr
Checked and Approved by Shaykh Dr. Muhammad Abu Bakr Badhib

Shaykh Muhammad Carr has dedicated his life to studying and transmitting our beautiful deen. His studies have taken him around the globe, where he has benefitted from many luminaries. Under the guidance of his teachers – Shaykh Taha Karan, Shaykh Yaseen Abbas, Shaykh Muadh Ali, and many others – Shaykh Muhammad has grown to appreciate the beauty and benefits of diverse scholarship. He completed his memorization of the Qur’an at Dar al-Ulum Zakariyyah in September 1997 and received an Alimiyya Degree in 2006 from DUAI (Darul Ulum al-Arabiyyah al-Islamiyyah). He is also affiliated with Masjid Auwal in Bo Kaap, Cape Town (the oldest mosque in South Africa), where he serves as a co-imam, and Dar Al-Safa, where he has taught since 2018. As a teacher, he imparts the wisdom of our heritage and tradition by opening the door to students. As an imam, he has the unique opportunity to serve his community in daily life.

In addition to his roles as a teacher and imam, Shaykh Muhammad Carr has contributed significantly to the administrative and advisory aspects of Islamic institutions. Since 2023, he has served as the Administrative Director at The Imam Kurani Institute, contributing to the institution’s growth and development. He continues to pursue traditional Islamic Sciences, possessing a keen interest in Islamic Contract Law and Finance. Shaykh Muhammad has been a Shari‘a Board Member for Islamic Asset Management & Insurance Companies since 2001, aligning financial practices with Islamic principles.