Investment With Borrowed Money: Allowed?
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Investment With Borrowed Money: Allowed?



Reply Date

Apr 04, 2018


As-salamu `alaikum, respected scholars. I want to know whether it is permissible to borrow money for investments. Does Allah forbid us from buying goods or making investments (even if they are halal) using borrowed money, or does He stop us only from borrowing haram funds? Please, clarify the principle involved here, since I am unclear whether to borrow or not, for halal investments from halal sources. Many thanks.



Investment With Borrowed Money: Allowed?

Wa `alaykum as-salamu wa rahmatullahi wa barakatuh.

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:

Financing investment from a loan without interest is permissible.

Answering your question, Prof. Dr. Monzer Kahf, a prominent Muslim economist and counselor, stated,

Riba (usury) is any increment in a loan or a debt as mentioned in Verse 2:279 that is anything above the principal of the loan or debt. There is no difference between loans for consumption and loans for investment or to buy goods for trade. A loan without interest is, of course, permissible all the time but a loan with interest is not.

Financing investment from a loan without interest is also permissible. In other words, the prohibition is of the interest not of the loan and purpose of using the money is irrelevant.

Allah almighty knows best.

Editor’s note: This fatwa is from Ask the Scholar’s archive and was originally published at an earlier date.

About Prof. Dr. Monzer Kahf

Dr. Monzer Kahf is a professor and consultant/trainer on Islamic banking, finance, Zakah, Awqaf, Islamic Inheritance, Islamic estate planning, Islamic family law, and other aspects of Islamic economics, finance, Islamic transactions (Mu'amalat). Dr. Monzer Kahf is currently Professor of Islamic Finance & Economics at the Faculty of Economics and Management, Istanbul Sabahattin Zaim University, Turkey

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