Investing money in government projects in return for fixed profits

15-12-2005 | IslamWeb

Question:

Is it permitted in Islam to invest foreign money in the government wage earner scheme and take the specified rate of interest declared by the government? Is it sin like all other interest based banking project?

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Answer:

All perfect praise be to Allaah, The Lord of the Worlds. I testify that there is none worthy of worship except Allaah, and that Muhammad is His slave and Messenger. We ask Allaah to exalt his mention as well as that of his family and all his companions.

 

If the body that is running the government project accepts money for investment in return for a fixed profit (a fixed interest rate on the capital money invested, like 10%, or 15% and the like), then this is Ribaa (interest or usury) itself. The money being invested in development projects does not make it permissible as there is no difference between this and the projects sponsored by banks which deal with Ribaa. What is acceptable is that the person holding the capital money should be sharing the profits and losses according to a rate that should be agreed upon when signing the contract, like agreeing on a quarter, a half and the like and this is what is known in Islamic terms as Al-Muthaarabah.

Allaah Knows best.