Fatwa #1416717 April 2006United Kingdom
is it permisssible to invest in this business since it involves bank loan?
Question
The bank is going to provide a loan that has to be repaid in about 5 years. What I mean by my friend being short of 50% is that for example, if the cost of the project/business is 2 million, the bank is providing a loan of 1 million. My friend has to use his own resources to come up with the remaining amount of 1 million. Now my question is that in this case is it permisssible to invest in this business since it involves bank loan?
Answer
According to our understanding of your query, the bank is not entering into a partnership with your friend. It will simply be offering an interest bearing loan.
If our understanding of your query is correct, then we advise that there are two different issues; a) The Loan, and b) Partnership/profits.
In principle, it is not permissible to take an interest bearing loan. If one does not have sufficient money to start a big business venture, he should not do so. He should consider a smaller venture within his financial means. However, if your friend commenced a business with the loaned amount and you invested in such a business, the profits will be permissible. However, your friend will be sinful for being involved in interest. Furthermore, such a business is void of barakah and blessings.
and Allah Ta'ala Knows Best
Mufti Ebrahim Desai