The Ruling on Evading Prohibitions (‘Inah and Tawarruq)
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[The Ruling on Evading Prohibitions (‘Inah and Tawarruq)]
A commercial institution that people visit with the intention of borrowing to purchase certain goods. The buyer visits them and tells them, for example, that he wants to buy a car. They gather the price of the car for him and install the remainder for him with the known increase. This first buyer then sells it to another buyer, and the second one resorts to the same institution to borrow from it with the intention of paying the price of this car. They increase the installments for him, so there are two buyers for one good, and the transaction involves three or four people, while the one borrowing from is a single party, which is the institution. What is the ruling on this, O Shaykh?
This method of contracts is darkness upon darkness, and a ruse against the prohibitions of Allah. It is well known that if I gave you forty thousand on the condition that it becomes fifty thousand in a year, it is well known that it is riba (usury or interest) about which there is no disagreement. If you come to a person and you want the money but do not want to say: Give me forty thousand for fifty thousand in a year; because it is explicit riba,But I said: I buy a car for you and then sell it to you for a price higher than its value for the sake of installment payments. Then you go and sell it. If you sell it to the one from whom you bought it, it is the issue of ‘inah (a buy-back sale used to disguise a loan). If you sell it to someone else, it is the issue of tawarruq (a commodity sale used to obtain cash).
There is no doubt that the issue of ‘inah is a very clear ruse against riba. Instead of giving you forty thousand for fifty in a year, you made this nominal purchase which Allah knows, and you know, and the lender knows, and all creation knows, that the intention of this purchase is not a real purchase, but rather the intention is to take forty thousand for fifty. This is a clear ruse, and whoever does this has in him a resemblance to the Jews, may Allah keep us safe;Because the Prophet (peace and blessings be upon him) said: (Do not commit what the Jews committed, so that you make lawful the prohibitions of Allah by the slightest of ruses) .
And when the Jews, the Messenger of Allah (peace and blessings be upon him) invoked a curse upon them and said: (May Allah fight the Jews! Indeed, when the fats were forbidden to them, they rendered them liquid -Meaning: they melted them - and then sold them and ate their price) So when Allah forbade the Jews the fats, they said: Then: we do not eat the fat, but we melt it and sell it and eat its price. This is the ruse that the Jews made, and the Prophet (peace and blessings be upon him) invoked a curse upon them that Allah would fight them; because they are at war with Allah if they did this act.
And the ruse of the Jews is further than the ruse of these people; because the Jews did not eat the fat and did not sell the fat either, they melted it and then sold it and ate the price. As for this, instead of giving you forty thousand and it being upon you as fifty thousand in a year, he said: You buy this car for fifty thousand in a year, and then he buys it for forty thousand. This transaction is forbidden (haram) for the lender and the borrower, and it is obligatory for whoever did it to repent to Allah before death comes to him while he is engaged in this ruse -may Allah protect us from that- and whoever repents, Allah accepts his repentance;Because Allah said: [Surat al-Baqarah: 279] .
A commercial institution that people visit with the intention of borrowing to purchase certain goods. The buyer visits them and tells them, for example, that he wants to buy a car. They gather the price of the car for him and install the remainder for him with the known increase. This first buyer then sells it to another buyer, and the second one resorts to the same institution to borrow from it with the intention of paying the price of this car. They increase the installments for him, so there are two buyers for one good, and the transaction involves three or four people, while the one borrowing from is a single party, which is the institution. What is the ruling on this, O Shaykh?
This method of contracts is darkness upon darkness, and a ruse against the prohibitions of Allah. It is well known that if I gave you forty thousand on the condition that it becomes fifty thousand in a year, it is well known that it is riba (usury or interest) about which there is no disagreement. If you come to a person and you want the money but do not want to say: Give me forty thousand for fifty thousand in a year; because it is explicit riba,But I said: I buy a car for you and then sell it to you for a price higher than its value for the sake of installment payments. Then you go and sell it. If you sell it to the one from whom you bought it, it is the issue of ‘inah (a buy-back sale used to disguise a loan). If you sell it to someone else, it is the issue of tawarruq (a commodity sale used to obtain cash).
There is no doubt that the issue of ‘inah is a very clear ruse against riba. Instead of giving you forty thousand for fifty in a year, you made this nominal purchase which Allah knows, and you know, and the lender knows, and all creation knows, that the intention of this purchase is not a real purchase, but rather the intention is to take forty thousand for fifty. This is a clear ruse, and whoever does this has in him a resemblance to the Jews, may Allah keep us safe;Because the Prophet (peace and blessings be upon him) said: (Do not commit what the Jews committed, so that you make lawful the prohibitions of Allah by the slightest of ruses) .
And when the Jews, the Messenger of Allah (peace and blessings be upon him) invoked a curse upon them and said: (May Allah fight the Jews! Indeed, when the fats were forbidden to them, they rendered them liquid -Meaning: they melted them - and then sold them and ate their price) So when Allah forbade the Jews the fats, they said: Then: we do not eat the fat, but we melt it and sell it and eat its price. This is the ruse that the Jews made, and the Prophet (peace and blessings be upon him) invoked a curse upon them that Allah would fight them; because they are at war with Allah if they did this act.
And the ruse of the Jews is further than the ruse of these people; because the Jews did not eat the fat and did not sell the fat either, they melted it and then sold it and ate the price. As for this, instead of giving you forty thousand and it being upon you as fifty thousand in a year, he said: You buy this car for fifty thousand in a year, and then he buys it for forty thousand. This transaction is forbidden (haram) for the lender and the borrower, and it is obligatory for whoever did it to repent to Allah before death comes to him while he is engaged in this ruse -may Allah protect us from that- and whoever repents, Allah accepts his repentance;Because Allah said: