The Permissible Transactions and the Transactions of Riba (Interest and Usury)
His Eminence, Ash-Shaykh 'Abdul-'Aziz bin 'Abdullah bin Baz was asked: What is the ruling on buying a sack of sugar or something similar for 150 riyals to be paid at a later time, which is worth 100 riyals in cash?
He answered: There is no problem with this because the sale for cash is not delayed and the Muslims have not ceased using this type of transaction, and it is like a consensus (Ijma') from them for its permissibility. Some of the people of knowledge have taken a strange position regarding this and they forbid any increase in price for a delayed payment and they think that that is Riha (interest). But this is a view that is baseless and this transaction is not at all from Riba. This is because when the businessman sells the product to be paid later, he has only agreed to delay the payment so that he can gain some benefit by an increased amount. Also, the buyer only is pleased with the increase because of the delay allowed and his lack of ability to pay the price in cash up front. Thus, both of them benefit by this transaction. Indeed it has been confirmed from the Prophet that which proves the permissibility of that. That is in his commanding 'Abdullah bin 'Amr bin Al-'Aas to prepare an army, so he would buy a camel for two camels to be repaid at a later time. This action also enters into the generality of Allâh's Statement:
"O you who believe! When you contract a debt for a fixed period , write it down."
This transaction is from the types of permissible contracts of debt that are included in the mentioned Verse, and it is the same type of transaction as the sale of As-Salam. For verily, the seller in the Salam transaction sells some grain that he has, or some other product that is correct to sell in the Salam transaction, for the money that is present at a lower price than the price of the Salam product at the time of the Salam transaction. This is because the product of the Salam is to be delivered later and the price is paid in advance, Thus, it is the opposite of the issue that you have asked about, and it is permissible by the consensus of the scholars (Ijma'). It is like the sale that is conducted on delayed credit in meaning, and the need for it is urgent, just like the need for the Salam transaction, and the increase in the Salam is like the increase in the sale on delayed credit. The reason for both of them is the delay in delivering the product in the issue of the Salam, and the delay in delivering the price (money) in the issue of the sale on credit. However, if the intent of the person who buys the bag of sugar and similar things is to sell it and gain benefit from its price, and his intent is not to benefit from the product itself, then this is a transaction called At-Tawarruq. Some of the common people call it Al-Wa'dah. Indeed the scholars have differed regarding its permissibility, and they hold two different opinions: One of them is that it is prohibited and disliked, because the intent of it is to sell dirhams for dirhams. In this case the sales merchandise is only a means that is not the intent of the transaction. The second view of the scholars is that this transaction is allowed due to the urgent need for it, because everyone who has a severe need for cash may not be able to find someone to loan it to them without Riba (interest). This is also because this transaction is included in the generality of Allâh's Statement:
"And Allâh has allowed selling."
And His Statement:
"O you who believe! When you contract a debt for a fixed period, write it down."
This is also because the basic principle in the Islamic law is the permissibility of all transactions and dealings except that there is established evidence regarding its prohibition. And we do not know of any evidence in the Islamic law that prohibits this transaction. In reference to the reason of those who prohibit it or dislike it, which is its intent of getting cash, it is stated that it does not necessitate its forbiddance or its dislike. This is because the usual intent of those who do business in the various transactions is to get more money for less money, and the sold merchandise is a means of doing that. The only thing that makes this type of contract prohibited is if the buying and selling is from one person, like the issue of Al-'Eenah. For verily, that is taking a tricky means to deal in Riba (interest). The picture of this is that a person buys a product from another for a price to be paid later, then he sells it to him (i.e., back to the original seller) for a price that is less than the original price, thus taking cash for it. This is prohibited according to the Islamic law due to what it contains of a sly means of practicing Riba. This issue is called Al-'Eenah, and indeed a Hadith has been reported concerning it from 'A'ishah and also Ibn 'Umar, which proves its prohibition. In reference to the issue of At-Tawarruq that some of the people call Al-Wa'dah, it is another transaction that is not the same type of transaction as Al-'Eenah. The reason is that the buyer in At-Tawarruq buys the product from a person on credit to be paid later and he sells it to someone else for cash due to his need for the cash. There is no tricky method of practicing Riba in this, because the person who bought it is not the original seller. However, many of the people do not know what the Islamic law dictates in this transaction, so some of them sell what they do not own, then they buy the product after that and give it to the buyer. Some of them, if they buy a product, they sell it while it is still at the place of the original seller before they have taken legal possession of it. Both of these matters are not permissible due to what is confirmed from the Prophet that he said to Hakeem bin Hizam:
"Do not sell what you do not have."
And he said:
"Whoever buys some food, let him not sell it until he received all of it."
Ibn 'Umar said: "We used to sell food haphazardly, so the Messenger of Allâh sent someone to us to prevent us from selling it (the food we bought) until we had taken it to our homes." It also has been confirmed from him (the Prophet ) that he prohibited the product to be sold in the same place where it was bought until the buyers take possession of it and take it to their places.
From these Hadiths and what has been reported with their meaning, it becomes clear to the seeker of truth that it is not permissible for the Muslim to sell a product that he does not own and then go out and purchase it (after making the sale). Rather, it is obligatory to delay selling it until he has purchased it and taken it into his possession. It also becomes clear that what many of the people do of selling products while they are still at the place of the initial seller before being transferred to the possession of the buyer or to the store, is a matter that is not permissible due to what it contains of opposing the Messenger's Sunnah. It is also not permissible due to what it contains of playing with the business transactions and not staying within the limits of the purified Islamic law. This contains corruption, evils and disastrous consequences that none can count but Allâh. We ask Allâh to help us and all of the Muslims to adhere to His Law and beware of that which opposes it. Concerning the increase that makes the transaction from the Riba transactions, it is that which is given to the one who is owed a debt after the time for payment has come so that the person who took the loan can have more time and an extension. This increase is that which the people of the pre-Islamic times of ignorance used to practice and they would say their well-known statement to the person who owed the debt: "Either pay up or pay Riba." So, Islam prohibited that and Allâh revealed concerning it His Statement:
"And if the debtor is having difficult times (i.e., he has no money), then grant him time until it is easy for him to repay.
The scholars have unanimously agreed about the forbiddance of this increase and the forbiddance of every transaction that leads to trying to make this increase permissible. For example if a person who gives a loan says to the person who owes the debt: "Buy some sugar from me or something else on credit, then sell it for cash, or pay me what was initially due to me." For verily, this transaction is an obvious tricky means of trying to make the increase of Riba lawful that the people of the pre-Islamic times of ignorance used to practice, but by a method other than their method. Thus, it is obligatory to leave this, avoid it and give the person in debt who is having difficult circumstances more time until Allâh makes it easy for him to repay the debt. Likewise, it is obligatory on the person who owes a debt and he is in difficult circumstances to fear Allâh and work according to the possible methods that are permissible in order to get the money to pay off the debt and free himself of his responsibility owed to the creditors. If he is lax in this and he does not strive to take the means of paying off what is due on him of rights, then he is committing an injustice against the people who have rights, and he is not fulfilling the trust. Thus, he has the same ruling as the wealthy person who delays in paying what he owes. Indeed, it has been confirmed from the Messenger of Allâh that he said:
"The delay in payment of the wealthy person is Zulm (an injustice)."
And he said:
"Delay in payment on the part of one who possesses the means makes it lawful to dishonor and punish him."
And Allâh is the One Who is sought for help.
Also from the Riba transactions is what some of the banks and some of the businessmen do of increasing the amount of the loan, either unrestrictedly or adding a fixed amount every year. The first is like a person loaning someone 1,000 under the condition that he repays 1,100 or he lets him live in his home or use his shop or loans him his car or his animal for an appointed period or something similar to that of increases.
In reference to the second, it is that the person who gives the loan stipulates for himself every year or every month some fixed amount of profit for the usage of his wealth that he paid to the person who took the loan. It does not matter if it was given in the name of a loan or a trust. For verily, when the person takes it in the name of a trust in order to use it, it is a secured loan. And it is not permissible for the debtor to pay any profit (extra money) to the lender, unless he and the bank or he and the businessman agree to use that money in a manner of limited partnership (Al-Mudharabah). This is by a portion of the designated share of the profit being for one of them and the rest being for the other. This payment is also called Al-Qiradh and it is permissible by the consensus (Ijma') of the scholars. This is because both parties share in the profit and the loss, and the original money in this contract has the ruling of the trust in the possession of the worker. If it is ruined without any carelessness or transgression (by the worker), then he is not responsible for it. He only gets for his work the designated share of the profit that was agreed upon in the contract.
With this the legislated transactions and the Riba transactions become clear to you.
Source:
Fatawa Islamiyah, Vol. 4 Pages 346-347-248-349-350-351-352
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