As Salaam Alaikum Brother, I wish to enquire about an Investment plan offered by an Islamic Bank in Qatar. Plan as follows: - 10,000 dollars should be available in my aaccount at any given time. - 1.5% of the above amount is charged as Entrance Fee and it is "one time charge". - Returns are every Quarterly ranging from 3-8% of the invested amount. Can I Invest in such schemes? Jazak Allah Khairun.

All perfect praise be to Allaah, The Lord of the Worlds. I testify that there is none worthy of worship except Allaah, and that Muhammad, sallallaahu ‘alayhi wa sallam, is His slave and Messenger.

It appears that the mentioned transaction is a Mudhaarabah and if the outcome of the investment (between 3-8% of the invested amount) is not guaranteed, but it was said based on estimation and approximation, or that it was mentioned in comparison to previous or expected profits, then this does not affect the validity of the transaction because it is a condition in Mudhaarabah that no fixed amount of the profits should be allocated to any of the partners (the person undertaking the Mudhaarabah or the person who owns the money) based on a prior agreement. This condition was stated by all the jurists who belong to the four considerable schools of jurisprudence.

They (the jurists) said that the reason behind the impermissibility of fixing a certain amount of money as a share of profit is that what is meant by Mudhaarabah is profit-sharing, and this cannot be achieved unless the share of each of the two is a fixed percentage of the profit on the capital, but not a certain amount of money. For example, one may set a condition to have a half of the profit, a third, or a quarter, and so on. If one of them stipulates getting a fixed amount of money from the profit, or a certain percentage to be estimated in relation to the capital money, not the profits, then the Mudhaarabah is not valid. For more information, please refer to Fatwa 10549, 94668 and 237232.

As regards the issue of determining the duration of the Mudhaarabah during which the contract cannot be nullified, then there is a difference of opinion among the scholars about this. The view of the majority of the scholars is that this makes the Mudhaarabah void. However, Imaam Abu Haneefah and the Hanbali School of jurisprudence, according to one of the two narrations (of Imaam Ahmad), are of the view that it is permissible to set a fixed time limit for the Mudhaarabah transaction as it resembles hiring. Another reason for this view is that Mudhaarabah is a business transaction in which it is allowable to condition a specific kind of goods or activity, so it is also permissible to determine a period of time for it just like the Wakaalah transaction (an agency relationship between the Wakeel (agent) and Muwakkil (principal).

The view which appears to us to be the preponderant one – Allaah knows best – is the latter view as long as fixing a specific time frame for the transaction represents the desire of the owner of the capital provided there is no damage incurred by the other partner and that he consents to it in principle. Allaah says (what means): {…but only [in lawful] business by mutual consent.} [Quran 4:29] Besides, the Prophet, sallallaahu ‘alayhi wa sallam, said: “Muslims should abide by their conditions.” [Al-Bukhari]

On the other hand, the bank taking an amount from the investor at the time of the contract as fees of participation could be listed under the money paid to the person doing the Mudhaarabah as personal expenses. Some scholars hold that it is permissible while some others hold that it is prohibited. According to Al-Insaaf, a book on the Hanbali Fiqh: “The person undertaking Mudhaarabah is not entitled to receive money to cover his own expenses except based on a condition.”

Allaah Knows best.