A debtor investing the creditors loaned amount in a shareholding

Q. My husband has taken a loan from me for a building project. My husband agreed to pay the amount I loaned to him in installments after the building project is completed and once it is rented out to the tenants. My husband has asked me to invest as a shareholder in the building project with the same money that he owes me. So, he would take the money that he owes me an invest it for me as a share holder instead of giving the loaned amount to me. Can I do this? Or is this interest?

A. In principle, it is not permissible to derive any benefit from a loan as it amounts to Riba (interest). (Al-Ikhtiyaar Li-Ta’leelil Mukhtaar 2/33)

In the enquired situation, you had given the loan to your husband without making a condition of deriving any benefit from the loan by receiving a share in the building project. It was simply a loan given by you to your husband with an agreement of your husband paying back the loaned amount to you without you benefiting from it in any way and thus, the loan was permissible

Therefore, if your husband has given you an option of purchasing a share in the building project as a shareholder now, you may accept his proposal and pay it with the sum of the loaned amount of money that is owed to you.

As such, this in not tantamount to Riba (interest) as it was not a condition of giving the loan to your husband to benefit as a shareholder in the building project. It was an option made available to you afterwards. More so, it is a separate transaction altogether and will not affect the validity of the agreement of the loan.

Allah Ta’ala Knows Best

Mufti Ismaeel Bassa