Borrowing to provide funds for trade
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Fatwa number ( 4170 ):
Q: I am a merchant of goods, and hardship has truly befallen me, but I have a friend who said he would lend me a large amount of money so that I could trade with it, and at the end of each month I would pay him a certain amount in exchange for his money. Is it permissible for me to follow this method?
A: If the intention is that you buy goods from him for a deferred price
until a known term, paying him the price in installments according to your agreement at the time of the contract, on their due dates and amounts, then there is nothing wrong with that, for a sale with a deferred price is permissible in the Shari'ah; because of His saying, the Exalted and Majestic:[Al-Baqarah 2:282] the verse, and because it is established that he (peace and blessings be upon him) bought with a deferred price. And if the intention is that he lends you money to trade with, and you give him something each month in exchange for his money remaining with you, then this is not permissible, rather it is forbidden; because it is of the riba (usury or interest) that the texts have come to prohibit.
Q: I am a merchant of goods, and hardship has truly befallen me, but I have a friend who said he would lend me a large amount of money so that I could trade with it, and at the end of each month I would pay him a certain amount in exchange for his money. Is it permissible for me to follow this method?
A: If the intention is that you buy goods from him for a deferred price
until a known term, paying him the price in installments according to your agreement at the time of the contract, on their due dates and amounts, then there is nothing wrong with that, for a sale with a deferred price is permissible in the Shari'ah; because of His saying, the Exalted and Majestic:
O you who have believed, when you contract a debt for a specified term, write it down.
يَا أَيُّهَا الَّذِينَ آمَنُوا إِذَا تَدَايَنْتُمْ بِدَيْنٍ إِلَى أَجَلٍ مُسَمًّى فَاكْتُبُوهُ
Source
www.alifta.gov.sa
The Arabic text is copied verbatim from the original source, without any edits.