Q: How can I finance a new business without getting a loan?
My aim is to open a business but for the capital I would need to go to the bank, which they have agreed to lend. But on the other hand I feel this is forbidden as it involves interest. This is my only option of obtaining capital that I need in order to open the business. So the question is “how did our people at the time of Prophet (pbh) did business and obtained funds & how can I start a halal business”?
الجواب حامدا ومصليا ومسلما ومنه الصدق والصواب
A: You have the option of both procuring an interest free loan and retaining sole ownership of the business venture or alternatively you may come to an understanding with an investor who can provide capital for you whilst you manage the business venture. The profit will then be distributed between both parties according to a pre-agreed ratio. This is known as mudarabah. For further details see the following link: http://attahawi.com/2010/01/26/an-introduction-to-islamic-finance-by-mufti-muhammad-taqi-usmani.
And Allah knows best.
Mufti Mohammed Zubair Butt
Chair Al-Qalam Sharia Scholars Panel