Profits offered by a leading Islamic publishing company

Q509 :A leading Islamic publishing company in a Muslim country accepts deposits from member of the public and pays the depositor a monthly profit at a fixed rate. It adds a condition that if the depositor withdraws his money, he has to give one month's notice when the company will return the actual amount originally deposited. There is no time limit for keeping the investment. Is this practice permissible.

A509 : There is nothing wrong with placing certain conditions on an investment, such as requiring one month's notice for withdrawal of deposited money. The company wants to be able to adjust the withdrawal of deposits without affecting its transactions. Similarly, there is nothing wrong with paying profits at regular intervals. But what worries me is that the profits paid by the company are given at a fixed rate. What this means is that the returns on the investment have no proper relation to the actual profits of the company. Nor is the depositor taking any risk with his investment. In other words, if the company makes losses, rather than profits, it will continue to pay the fixed rate of profits to the depositors who bear no proportion of the losses. For these two reasons, i.e. the absence of risk and the advance determination of the rate of returns, the partnership between the depositor and the company is not complete. Therefore, the transaction cannot be approved.

Our Dialogue ( Source : Arab News - Jeddah )