Expansion Project

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Question:  We have an expansion project for our manufacturing plant but do not have the cash to fund the project. We have been approached by a company who will purchase our future turnover at a profit. The company will look at the at the historical sales and, based on the average turnover, they will purchase the turnover of the next six months for cash – at a profit. For example, if the average monthly turnover is R500 000, they will purchase the turnover of the next six months for R3 million. We will pay back R3.5 million over 4 months, R500 000 being the profit. Is this permissible? Many Muslim businesses are adopting this as it is claimed to be free from interest.

Answer: A The so-called “profit” in the transaction described in the question is 100% interest.  This is purely a loan on interest — with the empty words of “purchase”, “sale” and “profit” inserted to appease the parties. By changing the names, something which is haraam will not be transformed into halaal. It will always remain as haraam as ever. It is the onus of the businessmen to enquire FIRST from ‘Ulama experienced in the field, so that they do not taint their wealth with haraam and jeopardise their Hereafter.

Involvement in interest – whether taking, giving, witnessing or recording – is totally haraam. It invites the curse of Allah Ta‘ala, destroys all the barakah and peace and makes the wealth earned in such a manner a source of misery. Therefore totally refrain from such transactions.

Investment

As for your expansion project, if you do not have the cash to invest, what is the need to expand? If a person has surplus funds, it is indeed permissible for him to invest it in some halaal enterprise or investment. If he does not have surplus funds, what then is the reason to expand on borrowed finance (or credit)? Is it due to lack of contentment (which has generally become a lost and forgotten concept)? Is it simply greed? Is it a status symbol, or the desire to be ahead of the pack in the race for ever more? Is it due to being sucked into the western capitalist mindset and system — that despite owning substantial assets, generally a person is always enslaved by massive debt!!! He thus has to continue working from eight till late, and continue slave driving others at the same time, in order to reach his ever rising targets. The capitalistic cycle consumes one and overshadows everything – it severely affects one’s ‘ibaadah, family life and also engulfs one’s heart and mind. One then eats, sleeps and even prays business — all the time thinking about deals, suppliers, customers, banks, investments and... money, money and more money... and between all of this constantly worrying about — among numerous other aspects — overheads, payments, pilferage and the taxman. This cycle continues at the expense of one’s deen. Often salaah is either totally omitted, missed in its time or not performed with jamaat, the laws of sharee‘ah are often compromised in one’s transactions and many people are oppressed or exploited in the process. This continues until when suddenly all the ambitious plans of never ending “growth” are halted and one is buried in the dust. By then the time to build one’s abode of the Hereafter has passed.

Basic Necessity

It is noteworthy that while there are many instances of taking loans or buying on credit mentioned in the aheadeeth, all these instances were for basic necessities. Loans and credit were never resorted to in order to build empires.

Debts are a serious issue. The ahaadeeth sound a severe caution against debts. It is reported that every act of a shaheed (martyr) is forgiven except debt (Musnad Ahmad #7051). The deceased’s entry into Jannah is suspended until his debts are paid. Hence as far as possible taking loans should be avoided. One should consult an experienced ‘Aalim and ascertain whether one’s circumstances warrant the taking of loans.

Contentment

Therefore, if you do not have surplus funds, do not expand. Be content with what Allah Ta‘ala has blessed you with and aspire for barakah through obedience to Him. In particular, strive to “expand” in contentment and insha-Allah you will find peace and serenity.

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