Is investing on behalf of another person and taking a profit from it permissible?

Wa alaykum assalam wa rahmatullahi wa barakatuh.

Thank you for your question. This is a common and important issue in Islamic finance. The arrangement you describe—where you invest someone else’s money and take a share of the profit—is permissible in Islam, provided it is structured correctly according to the principles of Mudarabah (profit-sharing partnership) or Wakalah bi al-Ajr (agency with a fee).

The Permissible Framework: Mudarabah

In Islamic jurisprudence, the contract of Mudarabah (also called Qirad) is the ideal model for this situation. It involves two parties:

• Rabb al-Mal (capital provider): Your aunt, who provides the funds.
• Mudarib (entrepreneur/manager): You, who invest the money with your expertise and effort.

The profit is shared between you according to a pre-agreed percentage (e.g., 50%, 30%, 70%). The loss, however, is borne solely by the capital provider (your aunt), unless the loss is due to your negligence, misconduct, or violation of the agreed terms.

Evidence from the Sunnah: The Prophet Muhammad (peace be upon him) himself engaged in Mudarabah with the capital of Khadijah (may Allah be pleased with her) before prophethood. The Companions practiced it widely, and there is consensus among scholars on its permissibility.

• Ibn Majah reported that the Prophet (peace be upon him) said: “Three things contain blessing: …and Mudarabah.” (Sunan Ibn Majah, hadith 2289; graded hasan by al-Albani).
• Shaykh al-Islam Ibn Taymiyyah said: “Mudarabah is permissible by the Qur’an, Sunnah, and consensus of the scholars.” (Majmu’ al-Fatawa, 29/21)

Key Conditions for Your Situation:

1. Both parties must consent to the profit-sharing ratio before starting the investment. This must be a percentage, not a fixed amount (e.g., “I will take 30% of the profit”).
2. You cannot guarantee her principal (i.e., promise to cover any losses from your own pocket). Losses are hers alone, unless due to your negligence.
3. The investment must be in Shariah-compliant ventures (no interest, alcohol, gambling, etc.).
4. Your role is limited to investment; you cannot take a salary or fee on top of the profit share, unless you have a separate, transparent agreement for management services (Wakalah).

Alternative: Wakalah bi al-Ajr (Agency with a Fee)

If you prefer not to share in the upside risk, you can act as her agent (Wakeel) and charge a fixed fee for your time and effort, regardless of profit or loss. This is permissible as long as the fee is not linked to the profit amount (which would turn it into a loan with benefit—riba). Shaykh Ibn Baz and Shaykh Ibn Uthaymeen allowed a fixed management fee in addition to a profit share, but this requires clear disclosure and should not lead to ambiguity (gharar).

What to Avoid

• Do not give her a fixed return or guarantee her capital (e.g., “I will return your money plus 10%”). This is riba (usury), which is strictly prohibited.
• Do not combine a loan with a profit share (e.g., if she lends you the money and you also share profits). The Prophet (peace be upon him) forbade combining a loan with a sale (or partnership) in a way that creates interest.
• Avoid uncertainty (gharar) in how profit is calculated. Agree upfront on expenses that are deductible before splitting profit.

Ruling from Major Contemporary Salafi Scholars

• Shaykh ‘Abd al-‘Aziz ibn Baz (may Allah have mercy on him) said: “It is permissible for a person to take money from someone to invest it in trade, and the profit is divided according to a pre-agreed percentage, such as half or one-third, etc. This is called Mudarabah, and it is permissible.” (Majmu’ Fatawa Ibn Baz, 19/214)
• Shaykh Muhammad ibn Salih al-‘Uthaymeen (may Allah have mercy on him) said: “If you invest money for someone with the permission of the owner, and you agree to share the profit, then it is a valid Mudarabah. You are entitled to your share of the profit as agreed.” (Fatawa al-Islamiyyah, 2/427)
• Shaykh Salih al-Fawzan (may Allah preserve him) stated: “Mudarabah is one of the permissible forms of partnership. The Mudarib is entitled to a share of the profit, not a fixed sum, because that would be a wage and could lead to usury.” (Al-Mulakhkhas al-Fiqhi, 1/198)

Practical Steps for You

1. Sit with your aunt and explain the Mudarabah model: she provides capital, you provide expertise, and you agree on a clear percentage split (e.g., you take 30% of net profit, she takes 70%).
2. Put the agreement in writing (even a simple document) to avoid future disputes. Include the profit split, duration, types of investments allowed, and how expenses are handled.
3. Invest only in Shariah-compliant assets (e.g., equity of companies with permissible business, commodities, real estate, etc.).
4. Keep transparent records of all transactions and profits.
5. Do not mix your personal funds with the investment fund unless you have a separate agreement for co-investment.

Conclusion

Yes, it is permissible for you to invest your aunt’s money and take a portion of the profit, provided you use a valid Mudarabah contract with a clear profit-sharing ratio, avoid any guarantee of principal or fixed return, and invest in halal ventures. This arrangement is blessed and beneficial for both parties.

May Allah bless your endeavor and grant you both success. If you have further details about the nature of the investment, I can offer more specific guidance.

Wa alaykum assalam.