Borrowing a Good Loan from Brother for Commercial Project or Purchase of Land

12-2-2023 | IslamWeb

Question:

Assalaamu 'AlaikumMy question is that can I borrow money from my brother and start a business with it or buy a land with it?Also can I share the profit with him like 80-20 or 30-70? Or without sharing the profit is it permissible?JazakALLAH khair

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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 is His slave and Messenger.

You can borrow a good loan from your brother, which has no interest, and this will be a secured debt on you that you have to give back to him. It is not permissible for you to agree with your brother that you will give him a percentage of the expected profits resulting from the commercial project or the purchase of land because you are just borrowing the money from him; this is because agreeing to increase the loan, even by one dirham, is an explicit usury that is strictly forbidden.

However, it is permissible for you to agree with your brother on the Sharee’ah-based speculation [Mudharabah], which is based on two main things: one of them: that each of the owner of the money and the speculator has a share of the profit according to what they agree upon, such as: 30%, 70%, and so on.

The second: Not guaranteeing the capital of Mudharabah because it is a partnership between them. The owner of the capital participates with his money, and the worker participates with his efforts. If a loss occurs in the capital, it is only the owner of the money who bears it. Also, the worker loses his effort.

This applies if there is no negligence, or breach of what the owner of the money has stipulated; if something of that happened, and it resulted in a loss, the worker is liable for it.

For more benefit on Mudhaarabah / al-Muraabahah, please refer to Fataawa 306337, 276166, 244552, 164735, 10549, 148103, 228259, 94668 and 237232.

Allah knows best.