Silent Partnership: Legitimacy of Mark-Up Agreements in Silent Partnerships

Practical Laws of Islam as per the teachings of Imam Khamenei

Silent Partnership: Legitimacy of Mark-Up Agreements in Silent Partnerships

English:

Question #1882:

I took a sum of money from a friend of mine by way of a silent partnership. It was agreed that I would return the money with an extra amount added to it after a period of time. I gave part of this money to another friend who was in need of it. It was agreed with the latter that he would settle one-third of the mark up. Is this type of dealing legitimate?

Answer #1882:

Taking money from someone on condition that it would be paid back after a while with an extra amount added to it does not fall under the silent partnership type of contract. It is a ribā-bearing loan that is ḥarām. Taking the money as silent partnership does not amount to borrowing. The money will not become the property of the working partner. In other words it remains the property of the original owner. However, the working partner can still trade in it. They [the owner and the working partner] share the profits made in accordance with the partnership they agreed. The recipient of the money has no right to lend any of it to a third party, nor has he the right to give it to the others under a silent partnership deal unless it is done with the consent of the owner.

-Imam Khamenei, Practical Laws of Islam, Importance and Conditions of Silent Partnership