Question: Is the money gained in which an investment is made as in a "Mutual Investment", is that considered interest? If so what is to be done with this money?

Answer: According to the teachings of the Shariah, when an investment is made by a Muslim, then he must agree to share in the profits as well as in the losses. The amount to which profits will be shared will be determined by the investors, while the loss will be in proportion to one's investment. Another essential element in investments is that it can only be done in shariah compliant products (that is, Halal (lawful) products). Using both these guidelines, one will be able to determine whether his investment contract is lawful or not.

In non Islamic banks, financial institutions and investment companies, both the above elements are absent. First of all, investors are known only to be reaping benefits, while losses are borne by someone else. Investors do not take the responsibility of absorbing the losses. These institutions are also not confined to investments in only shariah compliant products. They invest in anything in order to bring a handsome return to their customers.

With this understanding, we can say that the profits derived from mutual investment companies will be lawful if the investment was done in lawful products. In order to get this information, one can contact the relevant persons in the company. If the profits are not from halal (lawful) investments, then a Muslim will not be allowed to benefit from the monies earned. He must give it away to the poor and needy. If one cannot get an answer with respect to where his capital was invested, then the profits earned would be deemed to be doubtful and hence, must also be given away to the poor and needy. If the profits are from halal (lawful) investments, then he will be allowed to benefit and use the monies collected.


And Allah knows best.
Mufti Waseem Khan