A loan with a conditional increase upon repayment
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Fatwa number ( 21286 )
Q: It has become widespread among people to purchase from banks on an installment basis in exchange for an increase in the selling price, knowing that the bank does not own the car or the building, nor does it have it in its possession. Rather, the buyer selects it from one of the owners, then goes to the bank to request it. The bank then purchases it, pays its cash value, and delivers it to the buyer on an installment basis after they have signed the contract between them, and he commits to the required conditions for repayment and receives it thereafter. The question is: Is this sale permissible? Because we hear from you and from the scholars, and we read in the hadith, that it is not permissible for a person to sell something unless he owns it and takes it into his possession, and the bank in reality has not owned this car or building, nor has it purchased it for itself, but rather it purchased it for this specific buyer who requested it by name after he had requested it as being for him. They argue that the buyer is not obligated to purchase it if he changes his mind, but they know that he is determined to buy it, and if that were not the case, they would not have bought it? The second question is: The bank conditions upon the buyer that if he changes his mind about the purchase, he is obligated to pay the loss that befalls the bank as a result of his withdrawal from
the purchase. Is this condition valid? The bank claims that they have a religious fatwa regarding this. If they have a fatwa regarding this, is it religious or is it a deception of Allah the Exalted? Because the reality of this transaction is the purchase of cash with cash and an increase, but that car or building has been made a means to make riba permissible through the most trivial of tricks. Give us a ruling, may you be rewarded, for the matter has become widespread and its spread has grown.
A: It is not permissible to deal in the transaction mentioned; because its reality is a loan with a conditional increase upon repayment, and the form mentioned is nothing but a trick to reach the forbidden riba by the Book, the Sunnah, and the consensus of the Ummah, in addition to the fact that the bank sold the commodity before it owned it, and the Messenger (peace and blessings be upon him) said:Sunan Ibn Majah 2187Hasan (Darussalam) Therefore, it is obligatory to abandon dealing in it in obedience to Allah and His Messenger (peace and blessings be upon him). And success is from Allah, and may Allah send prayers and blessings upon our Prophet Muhammad, his family, and his companions.
Q: It has become widespread among people to purchase from banks on an installment basis in exchange for an increase in the selling price, knowing that the bank does not own the car or the building, nor does it have it in its possession. Rather, the buyer selects it from one of the owners, then goes to the bank to request it. The bank then purchases it, pays its cash value, and delivers it to the buyer on an installment basis after they have signed the contract between them, and he commits to the required conditions for repayment and receives it thereafter. The question is: Is this sale permissible? Because we hear from you and from the scholars, and we read in the hadith, that it is not permissible for a person to sell something unless he owns it and takes it into his possession, and the bank in reality has not owned this car or building, nor has it purchased it for itself, but rather it purchased it for this specific buyer who requested it by name after he had requested it as being for him. They argue that the buyer is not obligated to purchase it if he changes his mind, but they know that he is determined to buy it, and if that were not the case, they would not have bought it? The second question is: The bank conditions upon the buyer that if he changes his mind about the purchase, he is obligated to pay the loss that befalls the bank as a result of his withdrawal from
the purchase. Is this condition valid? The bank claims that they have a religious fatwa regarding this. If they have a fatwa regarding this, is it religious or is it a deception of Allah the Exalted? Because the reality of this transaction is the purchase of cash with cash and an increase, but that car or building has been made a means to make riba permissible through the most trivial of tricks. Give us a ruling, may you be rewarded, for the matter has become widespread and its spread has grown.
A: It is not permissible to deal in the transaction mentioned; because its reality is a loan with a conditional increase upon repayment, and the form mentioned is nothing but a trick to reach the forbidden riba by the Book, the Sunnah, and the consensus of the Ummah, in addition to the fact that the bank sold the commodity before it owned it, and the Messenger (peace and blessings be upon him) said:
Do not sell what is not with you.
لا تبع ما ليس عندك
Source
www.alifta.gov.sa
The Arabic text is copied verbatim from the original source, without any edits.