The Islamic Requirements of Mudhaarabah
Fatwa No: 461236

Question

Assalamu Alaikum,There is a company which accepts investments from individuals. They make investments in gold, silver etc. They give their profits as dividend to individuals. When we want to discontinue, they return the money in cash and not in gold. Is this investment halal? Kindly advise.Regards.

Answer

All perfect praise be to Allah, The Lord of the Worlds. I testify that there is none worthy of worship except Allah, and that Muhammad  sallallaahu  `alayhi  wa  sallam ( may  Allaah exalt his mention ) is His slave and Messenger.

The question needs more clarification in order for us to provide an accurate answer, among which is clarifying the type of money paid to that company. In any case, if the money is paid to others whether it is a company or individuals in order to invest it in return for a percentage of profit, then this is Mudhaarabah which has some Islamic requirements, which we have already highlighted in Fatwa 81579.

If this is the case, and the company does not guarantee the capital money for the investor, and it gives a percentage of profit that is defined, which is not limited to a known amount, or a percentage added to the capital money, and it abides by the Islamic conditions in its sales and purchases of gold, then there is no harm in dealing with it and investing money in it.

The fact that the company gives the investor cash and not gold when stopping the Mudhaarabah, then this does not affect the validity of the transaction, and the question is about this. In general, the company is not obliged to give the investor the very gold, but there are some details about the issue, which we cannot elaborate in this Fatwa. For more details on this matter, you may refer to the books of the scholars when speaking about the invalidation of the Mudhaarabah.

It should be mentioned here that one of the terms of sale of gold in cash currency is that it should be hand in hand in the meeting of the contract, or something that serves instead, like the transfer of gold from the account of the seller to the buyer's account, and the transfer of currency from the account of the buyer to the seller's account. The same thing applies to the currency sale when its type varies because the Prophet  sallallaahu  `alayhi  wa  sallam ( may  Allaah exalt his mention ) said: “…if the (traded product) types differ, then sell as you wish if payment is made hand to hand.” [Muslim]

For more benefit, please refer to Fatwa 173393 and 282775.

Allah knows best.

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