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Dormant partnership in Islam - A footnote

August 19, 2011


Imām Mālik says that it is impermissible for a Muslim to invest his surplus capital with a kāfir in a mudārabah. As the trader is the owner of the mudārabah-business, and a party whose management of the trading venture should be left to his discretion, the kāfir is free to follow his inclination, by deeming the forbidden lawful and engaging in usury (ribā). When buying and selling in the mudārabah, therefore, he is very likely to contravene the Law, which he does not believe in, and to do so without any qualms.
It is not permissible to sever the Dīn into two, and simply say, ‘Business is business; it is not religion.’
As for a Muslim entering into a mudārabah transaction in the opposite capacity of the trader investing a kāfir’s capital sum, Imām Mālik views it legal but reprehensible (makrūh). It is true that the Muslim is in charge of the business and thus (at least in theory) he will invest the capital of the venture in the halāl; at the same time, however, there is an element of concluding a contractual arrangement in terms of which the Muslim agrees to render his commercial services to a kāfir, which is a disliked subtraction from the full self-honouring that a Muslim should demand for himself vis-à-vis those human beings who cover up the truth.

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