Is there an Islamic way where you can guarantee percentage of profitability for the investor?
September 10, 2012
Q: Is there an Islamic way where you can guarantee percentage of profitability for the investor?
الجواب حامدًا و مصليًا و منه الصدق و الصواب
A: It is not permitted to guarantee a percentage of profit to the investor. Rather, the very basis for his eligibility for profit is that he is also exposing himself to loss. However, it is possible to give a projected rate of profitability with a certain degree of certainty when the income stream is generally constant. E.g., if the investor buys a share in a rental property where a rental has been agreed or is currently being paid by a lessee. Whilst this normally provides a known and stable income stream and the profit for investors can be projected with a degree of certainty there is always the possibility that the rental property is destroyed and the income stream dries up.