Can one accept a loan in lieu of the loan amount and 20% of the business?
Question
A businessman approached me to offer me a loan to start up my business after my shop was looted. He also asked for a 20% shareholding in my business. Can I accept the loan and give him a 20% shareholding in my business?
Answer
In principle, it is not permissible to derive any benefit from a loan, as it is tantamount to interest (Riba).
Thus, in the enquired situation, if the businessman intends to offer you a loan to start up your business, he cannot ask for a 20% shareholding in your business. He will only be entitled to the repayment of the principle amount of the loan, as asking for any amount over and above the loan amount would be tantamount to interest (Riba).
If the businessman is interested in deriving benefit from your business, then you may offer him a shareholding in your business by entering into a partnership, without the condition of a loan. He may then purchase a stipulated percentage of your business and accordingly become a partner, who will share in the business’s profits and losses as per the percentage of his shareholding. (Al-Ikhtiyaar Li-Ta’leelil Mukhtaar 2/33)
And Allah Ta’ala Knows Best
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- Answered by
- Mufti Ismaeel Bassa, Mufti Moosa Salie
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