Answer
In the Name of Allah, Most Gracious, Most Merciful.
All praise and thanks are due to Allah, and peace and blessings be upon His Messenger.
In this fatwa:
The Profit Participation Model (PPU) is halal in Islam if it follows a Mudarabah structure where profits are shared by agreement and losses are borne by capital providers. There must be no guaranteed returns, and all risks and roles must be clearly defined. Transparency and fairness are essential for Sharia compliance.
Responding to your question, Sheikh Ahmad Kutty, a senior lecturer and an Islamic scholar at the Islamic Institute of Toronto, Ontario, Canada, states:
Is Profit Participation Model (PPU) Halal in Business?
To state it upfront, Your education venture is Islamically sound and permissible
Your education project can be fully Shariah-compliant. Islam encourages partnership, shared risk, and ethical business practices. This venture follows these principles as a profit-sharing partnership.
Understanding Mudarabah: The Halal Profit-Sharing Model
The best model is a Mudarabah-style arrangement:
You, as the promoter, provide effort, expertise, reputation, and management.
Investors provide the financial capital.
Profits are shared as agreed; losses affect the capital, while your effort is rewarded only if the venture succeeds.
This reflects the Prophetic principle: no guaranteed gain without shared risk.
Profit sharing starts only after the venture is operational—when licenses are issued and classes begin. Before this, there is preparation, but no profits to share yet.
How Compensation and Expenses Work in a Halal Structure
Your contributions—building the brand, developing the curriculum, managing operations—are valuable in Islamic law. You can receive a defined share of profits for this work.
Any past expenses, opportunity costs, or early losses you covered are considered your contribution. These can adjust your profit share fairly, without burdening investors.
You may take a modest, market-rate salary for your daily work, as long as it reflects real services, is not excessive, and is separate from profit distribution.
A reasonable cap, like the amount you mentioned, aligns with Islamic fairness.
Key Rules, Risks, and What to Avoid in Profit Participation Models
If an investor passes away, their share remains and transfers to their heirs. A fixed partnership term—like five years—is valid if clearly documented.
Profits can be weighted based on roles and risks. Losses are borne by the capital, while your effort is not reimbursed—this is the essence of ethical risk-sharing.
Grouping similar investors is allowed, and running other educational activities is fine, as long as finances remain transparent and fairly allocated.
One key boundary: proprietary trading challenges are not allowed. They involve excessive uncertainty and fake transactions without real economic value. Avoiding these protects your income and conscience.
In conclusion, what matters most is clarity, fairness, and shared responsibility. Document everything, avoid ambiguity, and ensure all parties understand the risks and rewards.
If this venture is honest and fair, it’s not just allowed, it can actually be a form of worship. You’re serving knowledge while earning a living in a halal way.
May Allah bless your efforts and make them beneficial to many.
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Almighty Allah knows best.