Question: As far as I know, a company in Bangladesh is doing business of website development and hosting space sale. They are recruiting some investors through contracts.

The method of investment agreement is, if someone invests 1 lakh rupees, he will pay 2500 rupees as dividend on the fixed date of every month and return the full 1 lakh rupees at the end of the contract period. When asked why their dividend rate is fixed, they say that since their income is fixed, so is the dividend rate. Moreover, there is no chance of loss in the business of selling hosting space.

Notably, since this is an online business, there is absolutely no possibility of loss. Now what I want to know is, will it be legal to receive dividends by investing in this way or will it be interest?

Answer: The method of distribution of profits as described in the question will not be valid. Because, in terms of Fiqh, this method of contract is called 'Mudaraba'. And in the case of Mudaraba, if the amount of profit is fixed, the contract is not valid. Therefore, in the case in question, fixing 2.5 thousand taka in one lakh taka is an illegal method.

The valid method in mudaraba investment is to determine percentages. It is permissible to accept the profit as percentage agreed upon by both the contracting parties. There is no fixed amount. But the percentage of profit must be agreed upon by both the contracting parties and in this case the rate of profit need not be equal. (Badayus Sanayi 6/86)

Therefore, if the percentage is determined, two and a half thousand takas can come from one lakh taka, then the transaction will be valid if the percentage is determined with the consent of both.

Secondly, the rule in the case of Mudarabah is that if there is a profit in the business, the profit is divided between the parties as per prior agreement and if there is a loss in the business, the investor or Sahib-al-Mal bears the loss.

On the other hand, the business operator or Mudarib does not receive any remuneration for his talent and labor, which is considered as his loss. However, if the loss is due to breach of rules, negligence or breach of contract by the Mudarib, then the Mudarib has to bear the liability for the loss. (Badayus Sanaye 5/119 Majallatul Ahkamil Adlia, Maddah 1369 Raddul Muhtar 5/648)

Therefore, in the case in question, at the end of the contract period, the full amount of one lakh rupees will be returned; Such condition has no value.

Answered by: Shaykh Umayer Kobbadi