In Islamic law, the permissibility of an investment depends on whether it is structured as a partnership (shirkah) or a loan (qard). The distinction between the two is essential.

If money is given as a loan, then any guaranteed increase over the principal is considered ribā, regardless of how it is labeled. The Prophet ﷺ said:

“Every loan that brings a benefit is ribā.”
(Reported by al-Bayhaqi; meaning accepted by the jurists)

In contrast, a permissible partnership requires that profit be shared as a percentage of actual profit, not sales, and that loss is borne according to capital contribution. It is not permissible in a partnership to guarantee the return of capital or a fixed profit amount.

In the scenario described, the arrangement is problematic for several reasons. First, the return is calculated as a percentage of sales, not profit, which means the investor benefits regardless of whether the business makes a profit or suffers a loss. Second, the investor’s capital is effectively guaranteed, since the payments continue until the original $2,000 plus an additional $1,000 is fully repaid. Third, the return is capped at a fixed amount, which resembles a predetermined repayment rather than genuine profit-sharing.

Because of these elements, the scholars would classify this arrangement as a loan with a guaranteed increase, even if it is called an “investment.” This makes it impermissible, as it functions as ribā in substance, not merely in form.

A Shariah-compliant alternative would be to structure the agreement as a true partnership, where the investor receives an agreed percentage of net profits, bears the risk of loss, and does not have a guaranteed return or fixed exit amount.