Fatwa #4741410 April 2024South Africa
Borehole Drilling Investment
Question
To make it simpler, we decided now on the below (please advise if this makes the process easier to be workable)
Once the investor funds are received.
The business will make deposits (using only investor funds) to the company contracted for drilling of boreholes (same company will be installing the underground pumps for boreholes). Balance of payment on completion of above (using investor funds only).
The balance of material needed can be purchased by the businesses own cash flow, labour cost (installation of said material) can be actioned once again using capital from businesses own cash flow.
We will be charging the client more for the drilling, then get it done cheaper by a third-party drilling company, and thereby make a profit in the difference between the two prices. That will be the profit gained for ourselves and our investors.
What is the permissible method of the above investment?
Answer
In the Name of Allah, the Most Gracious, the Most Merciful.
As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.
Our understanding of the investment scheme is as follows:
- The investors will give funds to your borehole company for drilling boreholes, nothing more.
- Your company will use these funds specifically for actual borehole drilling.
- Your company will use those funds to outsource the drilling to a third independent company.
- Your company will charge your clients an amount that will be higher than the cost of drilling.
- Your company will profit from the difference between the drilling cost and client charge.
If the above is the method of investment, then we propose the following,
Your company should enter into a Wakalah bil Istithmaar (Agency to Profit) agreement with your investors. In this case, the investors are appointing your company as their wakeel to offer boreholes to clients. Your company does not have to drill the boreholes itself, that can be outsourced.
The investors will only contribute towards drilling of boreholes, nothing more. That will be the extent of your company’s role as Wakeel.
However, such an agreement has the following conditions:
- The wage of the Wakeel (your company) must be fixed beforehand. It may be a lump sum or a percentage of the invested funds.
- The profits will all belong to the investors.
- All losses will be borne by the investors.
- The Wakeel will only be liable if the loss was due to his negligence.
- The amount and term of the investment must be clearly mentioned at the outset.
We advise you to create a contract reflecting the above investment method and send the contract to us for approval.
And Allah Ta’āla Knows Best
Bilal Yusuf Pandor
Student Darul Iftaa
Lusaka, Zambia
Checked and Approved by,
Mufti Ebrahim Desai
(2021-02-28)