How Does the Shari’a Construe a Loan from a Partnership to One of Its Members?

Answered by Shaykh Abdul-Rahim Reasat

Question

I would be grateful if you could let me know how the shari’a construes a loan from a partnership to one of its members. As the member receiving the loan would appear to be both debtor and joint creditor, it is perhaps not really a loan because there is no complete exchange of cash for debt? If that is the case, could it be said that any increase when repaying such a loan isn’t riba?

Answer

The best approach would be to take a loan from the personal wealth of the partners. You can repay it from your share of the profits if you like. This keeps the matter less complicated.

Borrowing from the partnership, however, would not be an issue. Your own share would not be considered a loan, because you own it. Any increase in repayment, in any loan, would be interest. [Maydani, al-Lubab]

I pray that helps. May Allah Most High grant you the best of both worlds.

[Shaykh] Abdul-Rahim Reasat
Checked and Approved by Shaykh Faraz Rabbani

Shaykh Abdul-Rahim Reasat began his studies in Arabic Grammar and Morphology in 2005. After graduating with a degree in English and History he moved to Damascus in 2007 where, for 18 months, he studied with many erudite scholars. In late 2008 he moved to Amman, Jordan, where he continued his studies for the next six years in Sacred Law (fiqh), legal theory (Usul al-fiqh), theology, hadith methodology, hadith commentary, and Logic. He was also given licenses of mastery in the science of Quranic recital and he was able to study an extensive curriculum of Quranic sciences, tafsir, Arabic grammar, and Arabic eloquence.