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(Book 32, Hadith 8) #36451
Investor Responsibility in Qirad Loans

SUMMARY: The investor is not responsible for any losses incurred by the agent beyond the principal amount invested.

Yahya said that Malik spoke about a man who made a qirad loan to a man and he bought wares with it and transported them to a commercial centre. It was not profitable to sell them and the agent feared a loss if he sold them, so he hired transport to take them to another city, and he sold them there and made a loss, and the cost of the hire was greater than the principal. Malik said, "If the agent can pay the cost of the hire from what the capital realized, his way is that. Whatever portion of the hire is not covered by the principal, the agent must pay it. The investor is not answerable for any of it. That is because the investor only ordered him to trade with the principal. The investor is not answerable for other than the principal. Had the investor been liable, it would have been an additional loss to him on top of the principal which he invested. The agent cannot put that on to the investor".

TOPICS
loan  *  investment  *  losses  *  qirad

QUICK LESSONS:
Invest responsibly according your agreement made between you and your partner/agent; Be accountable for your investments; Follow through on business ventures you enter into; Pay attention when investing money into something; Make sure you understand all terms before entering into any agreement related to investments/business ventures etc..

EXPLANATIONS:
This hadith discusses the responsibility of an investor when it comes to a qirad loan. A qirad loan is a type of investment where an investor provides capital to an agent who then uses that money to purchase goods or services with the intention of making a profit. In this case, the agent purchased wares and transported them to a commercial centre but was unable to make a profit from selling them there. He then hired transport to take them elsewhere and sold them at a loss. The cost of hire was greater than the principal amount invested by the investor. According Malik's opinion in this hadith, if the cost of hire can be covered by what was realized from selling off what was bought with the principal amount invested then that is acceptable but whatever portion remains must be paid for by the agent themselves as it is not something that can be put on to or taken from what was given by the investor originally. This teaches us that investors are only responsible for their own investments and should not have any additional liability beyond that which they have already agreed upon with their agents or partners in business ventures.

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