Riba In Secured Loans For Consumables
Ok good. Bro @faisalharoon , do you also agree or you have any questions? Lets move on to scenarios. Bro Nadeem, given below is something you have asked in another discussion so lets start with that one: “Would money investment in a business without a specifically identified object to be purchased for the business and without lender having title of a specific object. In such case would receiving monthly fixed income is like receiving interest in Islam?” Here are my views: Goods or titles do not make anything riba. So the transaction is cannot be unlawful because of that. Fixed income is Riba only in case and to the extend it’s higher than the total profit made. That’s because the value created by the loan money is less than the fixed amount being claimed. Maximum profit that can be claimed under a fixed profit arrangement is the agreed amount or the total profit whichever is lower. In case of a loss, the lender can still claim his invested amount back – that’s because Quran has allowed claiming the principal. Bear in mind, claiming principal in case of loss goes against the “value for value principle”. however’s since lender is not involved in decision making he can be indemnified for wrong decisions of the borrowers. Lender can also be indemnified for damages if principal is not returned on promised date. If you agree with my views we can move on to the next scenario.
Since Islam allows two parties to agree whichever way they want to share profit, we have no legal basis to say fixed profit is not ok. Lets say I lend money to my friends for his cab business at $100 a month fixed profit. He has many other investors and he uses the borrowed money to buy gas for the cabs, pay drivers salaries, car insurance and maintenance expenses. He also use borrowed money to buy cars to add to his fleet. Lets say $100 a month on $10000 loan is the market rate. we cannot say it’s unlwful or haram. we have no basis to say that. Loss sharing formula depends on the partnership agreement. Here too we can’t dictate terms. Islam allows us to claim the principle (and encourages us to let go.) Profit sharing is a subject of free and fair contract between two parties. Free consent and freedom of choice must not be comprised by false info, incomplete info, force of necessity or even planted bidders etc and the terms should be aligned with custom of trade of the society (maroof).