Giving money to a car dealership for a share of the profit

A question on giving money to a brother who owns a car dealership to trade with in return for a share of the profit, which Jordan's General Iftaa Department classified as mudaraba. ¹

The questioner said his brother has a car showroom selling for cash and on instalments, and that he gives him money to put to work there in return for a percentage of the profit; he asked whether this is forbidden. ¹

The Department answered that this is a form of mudaraba, in which the owner of capital gives money to someone who trades with it, the profit being shared at an agreed ratio, quoting the definition from Ibn Hajar al-Haytami's Tuhfat al-Muhtaj. ¹ It required that each party's share be a proportion of the profit actually made: a fixed sum for either party, or a percentage of the capital, is not allowed, because that amounts to guaranteeing the capital and a fixed return. ¹ It concluded that sharing the realised profit at the agreed ratio is permitted, while tying the return to the amount paid in with the capital guaranteed is forbidden riba. ¹

Jordan's General Iftaa Department published this fatwa on aliftaa.jo as no. 3803, dated 17 September 2023. ¹ The museum records this text as a historical document attributed to the body or scholar that issued it; it issues no ruling of its own.