A builder friend of mine told me that people are benefiting from him as they put their money in his business and he pay them fix rate of 2percent per month

You may enter into a Mudhaarabah contract with your friend. That is, forward%0D%0Ayour money to him as capital and he will invest the capital in his business.%0D%0A%0D%0AThe profits from your capital contribution be shared between you two%0D%0Aaccording to mutual agreement. There should be no ambiguity in the%0D%0Aagreement. It is advisable to have the agreement written and signed by both%0D%0Aparties. Kindly refer attached.%0D%0A%0D%0Aand Allah Ta'ala Knows Best%0D%0A%0D%0AMufti Ebrahim Desai%0D%0A%0D%0AMUDARABAH%0D%0A%0D%0A"Mudarabah? is a special kind of partnership where one partner gives money to another for investing it in a commercial enterprise. The investment comes from the first partner who is called 'rabb-ul-mal?, while the management and work is an exclusive responsibility of the other, who is called ?mudarib?.%0D%0A%0D%0ABusiness of the Mudarabah%0D%0AThe rabb-ul-mal may specify a particular business %40r the mudarib, in which case he shall invest the money in that particular business only. This is called al-mudarabah al-muqayyadah (restricted mudarabah). But if he has left it open for the mudarib to undertake whatever business he wishes, the mudarib shall be authorized to invest the money in any business he deems fit. This type of mudarabah is called .al-mudarabah al-mutlaqah" (unrestricted mudarabah)%0D%0A%0D%0ADistribution of the profit%0D%0AIt is necessary for the validity of mudarabah that the parties agree, right at the beginning, on a definite proportion of the actual profit to which each one of them is entitled. No particular proportion has been prescribed by the Shari'ah; rather, it has been left to their mutual consent. They can share the profit in equal proportions, and they can also allocate different proportions for -the rubb-ul-mal and the mudarib. However, they cannot allocate a lump sum amount of profit for any party, nor can they determine the share of any party at a specific rate tied up with the capital. For example, if the capital is Rs. IOOOOO%2F- they cannot agree on a condition that Rs. 10000%2F- out of the profit shall be the share of the mudarib, nor can they say that 20% of the capital shall be given to rabb-ul-mal. However, they can agree on that 40% of the actual profit shall go to the mudarib and 60% to the rabb-ul-mal or vice versa.%0D%0A%0D%0AIf the business has incurred loss in some transactions and has gained profit in some others, the profit shall be used to offset the loss at the first instance, then the remainer, if any, shall be distributed between the parties according to the agreed ratio.%0D%0A%0D%0ATermination of Mudarabah%0D%0AThe contract of mudarabah can be terminated at any time by either of the two parties. The only condition is to give a notice to the other party. If all the assets of the mudarabah are in cash form at the time of termination, and some profit has been earned on the principal amount, it shall be distributed between the parties according to the agreed ratio. However, if the assets of the mudarabah are not in the cash form, the mudarib shall be given an opportunity to sell and liquidate them, so that the actual profit may be determined.%0D%0A%0D%0AThere is a difference of opinion among the Muslim jurists about the question whether the contract of mudarabah can be effected for a specified period after which it terminates automatically. The Hanafi and. Hanbali schools are of the view that the mudarabah can be restricted to a particular term, like one year, six months, etc, after which it will come to an end without a notice. On the contrary, Shafi'i and Maliki schools are of the opinion that the mudarabah cannot be restricted to a particular time. 2%0D%0A%0D%0AHowever, this difference of opinion relates only to the maximum time-limit of the mudarabah. Can a minimum time-limit also be fixed by the parties before which mudarabah cannot be terminated? No express answer to this question is found in the books of Islamic Fiqh, but it appears from the general principles enumerated therein that no such limit can be fixed, and each party is at liberty to terminate the contract whenever he wishes.%0D%0A%0D%0AThis unlimited power of the parties to terminate the m%40darabah at their pleasure may create some difficul%ADties in the context of the present circumstances, because most of the commercial enterprises today need time to bring fruits. They also demand constant and complex efforts. Therefore, it may be disastrous to the project, if the rabb-ul-mal terminates the mudarabah right in the beginning of the enterprise. Specially, it may bring a severe set-back to the mudarib who will earn nothing de%ADspite all his efforts. Therefore, if the parties agree, when entering into the mudarabah, that no party shall termi%ADnate it during a specified period, except in specified cir%ADcumstances, it does not seem to violate any principle of Shari'ah, particularly in the light of the famous hadith, already quoted, which says:%0D%0A%0D%0A%0D%0AAll the conditions agreed upon by the Muslims are upheld, except a condition which allows what is prohibited or prohibits what is lawful. %0D%0A%0D%0AAn Introduction to Islamic Finance%0D%0AMuhammad Taqi Usmani%0D%0A