Can I be a partner in a company that borrows interest based loans?
May 31, 2016
Q: I want to buy a business with a Muslim friend, and I want to avoid using an interest bearing loan from the bank. My friend has studied the issue of interest and holds the opinion it is permissible in this country. If the bank agrees to loan the money to my friend whilst I make a contribution towards the purchase in terms of cash and property security, my friend can then make me a shareholder in the company following completion. He will be the sole applicant in the transaction. Some of the income from the company will be used to make loan repayments Would this be permissible for me, or is there any variation to this arrangement that could work ?
الجواب حامدا ومصليا ومسلما ومنه الصدق والصواب
A: It is not permissible to take out an interest bearing loan in this country despite what your friend may think. To do so is a sin and should be avoided. However, if your friend does take out the loan, the loan itself is not ritually impure. Rather, it is the interest payable that is the sinful part. If your friend took out the loan in his personal capacity and committed to pay back the loan and the interest in his personal capacity whilst you contributed the remainder, then the sin of the interest does not carry over to you. However, if the loan is taken in a business capacity and must be repaid with interest by the business, then you cannot be part of the business.