A father can lend his son money with which the latter can trade but it is not permissible for the first to take any of the profits
Q: All praise be to Allah Alone, and peace and blessings be upon the Last of the Prophets. To proceed:The Permanent Committee for Scholarly Research and Ifta' reviewed what His Eminence Grand Mufty received from the administrator of Scientific Institute in the governorate of
and the Da`wah (calling to Islam) deputy there;
Husayn ibn Ibrahim ibn Muhammad Ya`qub,
under number (Part No. 11; Page No. 131) (1/9) and date (2/1/1419 A.H.). Attached to it is a Fatwa request submitted by
Ibrahim ibn Ahmad Tawil
and referred to the Committee by the Secretariat General of the Council of Senior Scholars, under number (392) and dated 10/1/1419 A.H. The Fatwa request reads:I have seventy thousand Riyals, and I asked three sons that one of them take that sum of money to invest it in trade on condition that he would keep the capital (the seventy thousand Riyals) for me and return it whenever I ask for it. One of them, the oldest who was workless, agreed to that offer and his two brothers approved of and were pleased with it. My son actually took the money and invested it in trade and Allah provided him with good sustenance. Out of dutifulness, my son gives me some money at separate intervals until that sum has reached eleven thousand Riyals, which is part of his profit over eight years.My question is: Is it permissible for me to take that sum of money (the eleven thousand Riyals), which is part of his profit, from my son in addition to the capital I have given him to invest and benefit from its profits? When I die, will the heirs be entitled to a share of the profits or to the capital only?
Reviewing the Fatwa request, the Committee replied that the opinion that seems correct is that this kind of transaction is called by Fuqaha' (Muslim jurists) as Mudarabah (giving an amount of money to trade with in return for a share in the profit). So, if the owner of the money tells another: Take (Part No. 11; Page No. 132) this money and use it in trade and all its profit will be yours and the capital is mine, then this is a loan and the owner is not entitled to anything of its profit. Accordingly, all the profits that your son made are his and you are not entitled to anything more than your capital, whether you take it yourself or your heirs after your death. However, if your son gives you a share of the profits as a gift for you and not because he is benefitting from the money or because he delayed its payment, or if he gives you what he is used to give you before that loan, it is permissible for you to take it and nothing is wrong with that. Nonetheless, if you asked him to give you a share of the profits because he is benefitting from the money you gave him or because he has kept the capital with him for a long time, then this would be prohibited and it is impermissible for you to take it. For, in that case it would be considered as a loan that brought about benefit,
which is clearly Riba (usury). There is nothing wrong if you give your son that money in the form of a Mudarabah transaction in such a way that he will be entitled to a specific share of the profit, like a quarter, a half, three quarters or the like, and the rest of the profit will be yours, as this is called the Mudarabah partnership.May Allah grant us success. May peace and blessings be upon our Prophet Muhammad, his family, and Companions.