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Mudarabah into Musharakah

Fatwaa ID: 696


السلام عليكم
Tolibul Ilm, gave his capital for mudaraba. However, the profit from this mudaraba is not enough for him to cover his expenses.
The Mudarib, in turn, understanding this, asked: how much do you need per month? Having received an answer, the mudarib said: do not take your capital, I will top up the missing amount from my side every month. Will it be halal for a student?
Note: Initially, the student wanted to take the capital and invest it in another business where he expected a higher income. However, after istikhara, he received such an offer from the Mudarib.
جزاك الله خيرا

In the Name of Allaah, the Most Gracious, the Most Merciful.
As-salaamu ‘alaykum wa-rahmatullaahi wa-barakaatuh.

We take note of the details of your query. However, the exact nature and/or procedure of the mudhaarib covering the balance of the expenses is not clear. We mention below some of the possibilities.

If the mudhaarib is doing this as a favor for the student and does not expect anything in return, then that will be considered a gift. In such a case, this will be permissible and his reward will be with Allaah Ta’aala. He may not demand anything in return nor can the rabbul maal/investor demand him to continue.

If the mudhaarib proposed to cover the balance as an investment, then the partnership will be termed as mushaarakah, not mudhaarabah. In this case, the partners must revisit the business equity ratio as well as the profit ratio and agree on a new contract. This must be done before proceeding with the next venture. The student may remain a sleeping partner.

It is of utmost importance that all dealings remain clear and transparent. Everything should be documented as well.

And Allaah Ta’aala knows best.
Mufti Muajul I. Chowdhury

06/08/1444 AH – 01/01/2023 CE

وصل اللهم وسلم وبارك على سيدنا محمد وعلى ءاله وصحبه أجمعين


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