Banking: Private Profit-Sharing Lending Modeled After Islamic Banking
Practical Laws of Islam as per the teachings of Imam Khamenei
Banking: Private Profit-Sharing Lending Modeled After Islamic Banking
English:
Question #1913:
It has been the practice in Islamic banking that depositors receive licit profit for their money that the bank invests in different fields and ways. Is it permissible for individuals to adopt the same practice, i.e. lending money to people in the marketplace to invest as they see fit?
Answer #1913:
Should the money given to the other party be in the form of a loan with the condition that the recipient pays monthly or yearly interest at a certain percentage, such a transaction is ḥarām as a matter of religious law and the interest taken on the loan is treated as ribā that is ḥarām, albeit the loan contract per se is valid. Yet, if the money is deposited with the other party to invest it in a shar‘ī type of work and in accordance with a shar‘ī contract and the money owner gets a given share of the profits made, such a transaction is sound and the profits made thereof are treated as ḥalāl gains. Therefore, it makes no difference whether it is a person, a bank or another legal entity.
-Imam Khamenei, Practical Laws of Islam, Importance and Conditions of Banking