Exchanging gold for dirhams
Machine translationRead the Arabic original
Fatwa number ( 16823 )
Q: I am one of the businessmen in the Kingdom, and a branch of my trade consists of importing pure gold, 24-karat, from abroad and selling it to gold merchants and gold factories there. However, one of these merchants asked me to lend him, over varying periods, for example two hundred kilograms of gold, or more or less than that, on the condition that he withdraws what he needs from this quantity weekly, such as withdrawing 30 kilograms each week. Immediately upon withdrawal, he transfers to my bank account the equivalent in riyals of what he withdrew, and the full equivalent value actually enters my account. Then I deliver the gold to him, and so his withdrawals continue, along with paying the equivalent value in riyals of what he withdraws. I benefit from the riyals, and he also benefits from the gold. As is well known, the price of gold fluctuates, increasing or decreasing. The dialogue between us was that I would lend him the gold he needs, on the condition that he pays the price difference if the price rises. For example, if he withdrew (200 kilograms) and the price per kilogram on the day he withdrew the gold was forty thousand riyals (40,000), and it rose the next day to forty-two thousand riyals (42,000), then he must transfer to us the price difference of two thousand riyals (2000) for each kilogram he withdrew. And if, for example, the price fell the next day after he withdrew the gold to thirty-eight thousand riyals (38,000) per kilogram, then he may request that we lend him gold equivalent to the price difference, or that we pay him the difference in riyals, on the condition that it is covered in riyals for the equivalent value of the gold
he holds at any moment during the time the gold remains a loan with him. The merchant’s goal with this loan in that manner is that he waits for the price of gold to fall, for example, to below forty thousand riyals per kilogram, and at that moment he repays the loan by one of these two methods: 1- He buys from the local market the quantity of gold he borrowed and repays it to me in one lump sum, then I pay back the full amount he had previously transferred to me. By this, I am settled for the gold I lent him, and he is settled with the riyals he had previously transferred to me in exchange for the quantity of gold he borrowed. 2- He buys from me the full quantity of gold he had previously borrowed, and its value is deducted from the riyals he has with me, and I then deliver to him the price difference that remains for him, which is considered his profit. By this, I am settled with the gold that is mine, and he is settled with the riyals that are his. In this case, we see that the merchant has achieved a profit for himself through this loan. But if the opposite happens, due to variables in the global market, causing the price to rise to fifty thousand riyals (50,000) per kilogram, or it may rise to more than sixty thousand riyals (60,000) per kilogram, knowing that any differences, no matter how high the price goes, he will pay to me, the merchant to whom I lent the gold may be forced, out of fear of incurring further loss, to buy the loaned gold from me or from others at a price of fifty thousand riyals per kilogram, and return to me
the full loan, thereby incurring a loss. With my humble knowledge, it is permissible for me to lend a person a kilogram of gold or more, on the condition that he returns to me what he borrowed from me in gold, but the goal and method are as I explained to Your Eminence. I ask Your Eminence, may Allah reward you, to issue a fatwa to me: Is it permissible for me to lend my brother the merchant in the manner I described, and be settled for what I lent in the manner mentioned? I also ask Your Eminence that the answer be detailed for us based on the cases I mentioned to you, and guide us to the Sharia-compliant method by which we must deal with our brother the merchant. May Allah guide you, and we await Your Eminence’s answer. And peace be upon you and Allah’s mercy and blessings.
A : If the matter is as mentioned, then this transaction is not permissible; because it is an exchange of gold for dirhams, and exchange requires mutual possession in the meeting, which did not occur in this mentioned sale. And success is from Allah, and may Allah send prayers and blessings upon our Prophet Muhammad, his family, and his Companions.
Q: I am one of the businessmen in the Kingdom, and a branch of my trade consists of importing pure gold, 24-karat, from abroad and selling it to gold merchants and gold factories there. However, one of these merchants asked me to lend him, over varying periods, for example two hundred kilograms of gold, or more or less than that, on the condition that he withdraws what he needs from this quantity weekly, such as withdrawing 30 kilograms each week. Immediately upon withdrawal, he transfers to my bank account the equivalent in riyals of what he withdrew, and the full equivalent value actually enters my account. Then I deliver the gold to him, and so his withdrawals continue, along with paying the equivalent value in riyals of what he withdraws. I benefit from the riyals, and he also benefits from the gold. As is well known, the price of gold fluctuates, increasing or decreasing. The dialogue between us was that I would lend him the gold he needs, on the condition that he pays the price difference if the price rises. For example, if he withdrew (200 kilograms) and the price per kilogram on the day he withdrew the gold was forty thousand riyals (40,000), and it rose the next day to forty-two thousand riyals (42,000), then he must transfer to us the price difference of two thousand riyals (2000) for each kilogram he withdrew. And if, for example, the price fell the next day after he withdrew the gold to thirty-eight thousand riyals (38,000) per kilogram, then he may request that we lend him gold equivalent to the price difference, or that we pay him the difference in riyals, on the condition that it is covered in riyals for the equivalent value of the gold
he holds at any moment during the time the gold remains a loan with him. The merchant’s goal with this loan in that manner is that he waits for the price of gold to fall, for example, to below forty thousand riyals per kilogram, and at that moment he repays the loan by one of these two methods: 1- He buys from the local market the quantity of gold he borrowed and repays it to me in one lump sum, then I pay back the full amount he had previously transferred to me. By this, I am settled for the gold I lent him, and he is settled with the riyals he had previously transferred to me in exchange for the quantity of gold he borrowed. 2- He buys from me the full quantity of gold he had previously borrowed, and its value is deducted from the riyals he has with me, and I then deliver to him the price difference that remains for him, which is considered his profit. By this, I am settled with the gold that is mine, and he is settled with the riyals that are his. In this case, we see that the merchant has achieved a profit for himself through this loan. But if the opposite happens, due to variables in the global market, causing the price to rise to fifty thousand riyals (50,000) per kilogram, or it may rise to more than sixty thousand riyals (60,000) per kilogram, knowing that any differences, no matter how high the price goes, he will pay to me, the merchant to whom I lent the gold may be forced, out of fear of incurring further loss, to buy the loaned gold from me or from others at a price of fifty thousand riyals per kilogram, and return to me
the full loan, thereby incurring a loss. With my humble knowledge, it is permissible for me to lend a person a kilogram of gold or more, on the condition that he returns to me what he borrowed from me in gold, but the goal and method are as I explained to Your Eminence. I ask Your Eminence, may Allah reward you, to issue a fatwa to me: Is it permissible for me to lend my brother the merchant in the manner I described, and be settled for what I lent in the manner mentioned? I also ask Your Eminence that the answer be detailed for us based on the cases I mentioned to you, and guide us to the Sharia-compliant method by which we must deal with our brother the merchant. May Allah guide you, and we await Your Eminence’s answer. And peace be upon you and Allah’s mercy and blessings.
A : If the matter is as mentioned, then this transaction is not permissible; because it is an exchange of gold for dirhams, and exchange requires mutual possession in the meeting, which did not occur in this mentioned sale. And success is from Allah, and may Allah send prayers and blessings upon our Prophet Muhammad, his family, and his Companions.
Source
www.alifta.gov.sa
The Arabic text is copied verbatim from the original source, without any edits.