The ruling on selling Bills of Exchange to the Banks for Profits
Question :
A man buys merchandise from a merchant and he agrees with him on the time for paying, which will be a month or two. Then, the buyer signs a piece of paper for the merchant that is called a bill of exchange, which contains specifics regarding the price of the sale, the time for payment and the name of the buyer. After that, the merchant sells the bill of exchange to the bank and the bank pays the price of the bill of exchange in return for some profit that it takes from the merchant. Is this lawful or forbidden?
Answer:
Buying merchandise for payment to made later at a designated time for a specified price is permissible. Writing the price is desired Islamically due to the generality of Allâh's Statement:
"O you who believe! When you contract a debt for a fixed period, write it down."
In reference to selling the sales draft to the bank in return for its paying the sum and the bank taking responsibility for paying what is on the sales draft from the person who bought the product, this is forbidden because it is Riba.
May Allâh send blessings and peace upon our Prophet Muhammad, his family and his Companions.
Source:
The Permanent Committee
Fatawa Islamiyah, Vol. 3 Page 387
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