The arrangement you are talking about is called "heter iska"
["permission to do business"]. The earliest known formulation
of such a document seems to date from 16th century Europe. Funds for
capital investment were scarce, yet the need was great since in many
cases Jews were forbidden to own land and barred from many trades. The
Torah prohibition against lending (or, equally, borrowing) money with
interest is quite severe, and is the subject of many different verses.
On the other hand, when a large sum of money is involved, it is difficult
for the owner to give up the significant profits this capital could
realize if left available for investment or deposit, even if he is willing
to take the risk of lending the principal.
The basic idea is to create a limited profit-sharing partnership rather
than a debtor-creditor relationship. The document used is in no way
a subterfuge or ritualistic formula; a genuine business relationship
is created. There are many intricate technical details involved, with
safeguards for both sides, so it is highly advisable to enlist the mediation
of a knowledgeable rabbi. It is also possible to utilize a standard
form printed in the various reference works on Jewish business law [in
English: The Abridged Code of Law 66:6-8, or Contemporary Halachic Problems
II, Rabbi David Bleich, pp. 386-388. The latter has an excellent overview
of the entire subject pp. 376-384].
Without a doubt, the bottom line of a non-profit organization is nearly
always minus, especially if it is "successful" i.e. highly
active. Even so, some of their available funds could have been invested
profitably, even if the income generated is never enough to cover all
the operating costs of the institution.
For you, the lender, it is enough to know that the organization could
be investing your money profitably. Indeed, some authorities (such as
the late Rabbi Moshe Feinstein) insist this is mandatory and must be
stated in the written agreement. On that basis, you are entitled to
assume that the organization indeed is generating profits with
your money, and therefore the payments you receive above capital are
legitimately return on investment and not interest.
The borrowing institution, for its part, is content to make these limited
payments even if no gain was realized, thus saving its directors from
having to swear an oath in rabbinical court attesting to its lack of
profit or face a full audit of its accounts and records.
In a case where the organization is buying property or paying a mortgage,
the arrangement can be both simpler and more straightforward. For one
thing, real estate values are likely to rise. Also, an appropriate percentage
of the property may be deeded to the lender-investor, with subsequent
return of the loan taking the form of rent payments.
It is a big mitzvah to lend money to fellow-Jews, and especially to
Jews who use the money for the benefit of other Jews. I hope my brief
reply has helped to set your mind at rest. Don't hesitate to ask for