Topics: Islamic Finance

Understanding Collateral and Profit in Islamic Finance

Is It Permissible to Take Profit from Collateralized Assets?

Question: If someone has kept an auto (rickshaw) with me as collateral and taken a loan of one lakh from me, and I have given the auto back to the same person to drive, and he is giving me a profit of three thousand per month, can I take this profit?

Answer: First, it is necessary to understand the concept of collateral (rahn). Collateral means keeping something as a guarantee with the lender. If the lender has an auto as collateral, how can he give it back to the person who deposited it as a guarantee? This is a guarantee and security item, which the lender will keep as a guarantee.

One thing is clear that this guarantee item should be kept safely at home, just like gold and silver are kept safely at home. Therefore, the mentioned transaction is not permissible; rather, it is a usurious transaction.

Secondly, if you have your own auto and you rent it out to someone, then it is not permissible to take a fixed amount of three thousand rupees from it, meaning it is not permissible to take a fixed profit.

 Sheikh Maqbool Ahmed Salafi Hafizahullah

❪Jeddah Dawah Center – Al-Salamah – Kingdom of Saudi Arabia❫

Author: IslamicHelper

IslamicHelper

Recent Articles

Short-Term Online Islamic Courses: A Delusion

Many short-term online Islamic courses falsely promise Aalimiyyah degrees in just a few months. Discover why authentic religious knowledge requires… Read More

3 weeks ago

Hashr & Ba’th: The Day of Resurrection in Islam

Part 17 of "The Righteous Answers to Wise Questions" details the two types of Gathering (Hashr) on the Day of… Read More

3 weeks ago

Islamic Ruling: Missing Salah on Your Wedding Day

Despite the busyness of bridal preparations, delaying or missing prayer on your wedding day is strictly impermissible in Islam. Discover… Read More

3 weeks ago

7 Tactics of Satan by Ibn al-Qayyim to Misguide Humans

Ibn al-Qayyim (rahimahullah) explains the 7 progressive tactics Satan uses — from kufr and bid’ah to minor sins, wasting time… Read More

3 weeks ago

Khomeini’s Views on Sunnis: Shocking Fatwas Exposed

Discover Ayatollah Khomeini's fatwas on Sunnis (Nawasib) from his books: impurity, no inheritance, unlawful slaughter, takfir, and more. Refutation of… Read More

3 weeks ago

Khamenei’s Critical Views on Prophet’s Companions

This article exposes Iran's Supreme Leader Ali Khamenei's alleged disrespectful views on the Sahaba (Companions of Prophet Muhammad PBUH), drawing… Read More

2 months ago