In principle partnership is permissible. In case the other partner is a non-Muslim; the project must be run by the Muslim partner and care must be taken so that this partnership does not lead to what God has forbidden

Partnership with non-Muslims

Similar Questions

• Buying partnership shares in companies run by non-Muslims;

• Buying a share of a foreign company.

The Issue

Is it permissible for a Muslim living in a non-Muslim country to be a partner in a company that undertakes legitimate activities through buying a shares of it? It should be remembered that non-Muslims may resort to funding such projects through money sourced from banks.

Ruling

It is permissible for a Muslim to become a partner in a commercial company when the source of funds provided by other partners may vary, with some legitimately earned and some borrowed at interest. However a condition applies here: The loans must not be secured against a mortgage of the company’s assets. Moreover, the Muslim partner must have the authority to run the business, or to be able to monitor its activities to ensure that they are consistent with Islamic law. This is the ruling stated in Fatwa No. 1-16 of the European Council for Fatwa and Research.

The late Shaikh Abd al-Azeez ibn Baz said in his relevant fatwa: In principle, it is permissible for a Muslim to be in partnership in a commercial enterprise with a non-Muslim, provided that such partnership does not lead to a relationship of alliance or to commit or neglect something God has forbidden or made obligatory. Moreover, the Muslim partner should be the one who is in control. Nevertheless, it is preferable not to have such a partnership but rather to seek Muslim partners.[1]

Evidence

In principle partnerships are permissible, but should they lead to a relationship of alliance, or in committing what God has forbidden, or neglecting what He requires, then making such a partnership becomes unlawful because of what it leads to. The condition that the Muslim partner should be in control is stipulated so as to ensure that no deception within the company takes place. However, scholars advise against making such partnerships in order to reassure a Muslim with regard to his faith and property, since a partnership with someone who is hostile to his faith represents a risk to his own values, religion and property. To be safe in all these areas one should steer away from such a partnership.

Nevertheless scholars make clear that going into partnership with a non-Muslim in a commercial company is permissible, even though the funds provided by the partners may mix what is earned legitimately from the Islamic point of view with funds borrowed at interest. However, the responsibility for prohibited borrowing lies with the non-Muslim partners who have obtained such loans and not with the Muslim. The condition for not securing loans by mortgaging the assets of the company is made because the mortgage remains in place when the Muslim partner joins the company and thus he becomes committed as the guarantor as such of a loan and it is well known that such borrowing is forbidden in Islam. It is forbidden to help in obtaining usurious loans, even by documenting or witnessing them, and to be a guarantor is of even greater help. The stipulation that the Muslim partner should have the authority to run the company or monitor its activities is to ensure that its activities, including securing banking and funding facilities, are consistent with Islamic law. This includes transactions such as term purchase and sale with deferred payment, etc.

Sources

• Fatawa of the European Council for Fatwa and Research.

• Abd al-Azeez ibn Baz, Fatawa Nur'ala al-Darb.

• Mut’ib al-Qahtani (ed.), Is'af al-Mughtaribin bi Fatawa al-'Ulama’ al-Rabbaniyyin.

Khalid Abd al-Qadir, Fiqh al-Aqaliyyat al-Muslimah.