What is the ruling in Islam regarding installment sales?

The questioner : We have heard much from you in the past regarding murabahah sales practiced by Islamic banks. Then, in the recent period, we learned that the Orphan Fund for Asset Management began to exceed some of the transgressions and errors of the Islamic bank that scholars like you used to criticize them for, such as taking possession of the goods into their ownership and then selling them, and so on. However, they still have the problem of installments. They offer installments with a specified percentage that they disclose to the customer before buying for him and before selling to him. What is the ruling in Islam regarding this matter?

The Shaykh : We see that taking an increase in exchange for the term, which is called today installment sales, this increase is not prescribed; rather, it is riba (usury or interest) by the text of the well-known hadith, namely his saying (peace and blessings be upon him) But if what you mentioned is true, that the group avoided the violation you pointed out and remained with taking an increase in exchange for the term, then in my opinion the problem has become somewhat lighter, because the first matter, in my opinion, should not be a subject of any disagreement among Muslim scholars. As for taking an increase in exchange for the term, as the jurists used to say in the past, or in exchange for installments, as the merchants say today, this is a matter in which there is indeed disagreement, both in the past and in the present. And although we do not justify committing a violation of the Shari'ah on the pretext that the matter is subject to disagreement, we certainly see, on the other hand, that if a person takes the view of a group of scholars in a disputed matter, this is certainly less evil than one who contradicts the scholars by following a weak opinion that has no basis, or by following a personal individual interest or a followed desire. Installment sales, unfortunately, still have some scholars today who see it as permissible, but we continue to adhere to two hadiths, or more than that. The first is and the other is One of them said to the narrator, "What are two sales in one sale?" He said: "That you say, 'I will sell you this for cash at such-and-such, and on credit at such-and-such.'" For this reason, we advise all Muslim merchants not to deal in installment sales; that is better for them and more lasting in this world and the Hereafter. As for this world, this is one of the matters for which I am amazed that it is hidden from merchants, because among the methods of some merchants in some occasions and circumstances is that they announce discounts, for example, ten or twenty percent, with huge advertisements. Why this advertisement? Because in reality it attracts customers to them, so they sell a lot and a very large amount due to this discount. If a merchant among the Muslim merchants who wish to make their trade in material goods also a trade for the Hereafter, if one of them turned to this and announced that he sells his goods at the cash price on installments, you would find people rushing to him, because all people, even the rich, desire to buy goods at the lowest prices. If one merchant became known for selling goods on installments at the cash price, the sales of other merchants who sell at an installment price higher than the cash price would be disrupted. And at that time, this merchant who unified the price would be more successful in this world than the others, and in the Hereafter as well, because when he sells goods to a buyer on installments, he has a reward for that according to the Shari'ah. And it has come in some authentic hadiths, as we always mention this on such an occasion, urging merchants to seize the opportunity to earn rewards from Allah the Exalted and Majestic through their material trade, rewards that the one who stands in night prayer and fasts by day may not attain. Because the Prophet (peace and blessings be upon him) used to say in some authentic hadiths So if a merchant lends a Muslim one hundred dinars, it is as if he gave half a dinar in charity. Two hundred dinars is as if he gave one hundred dinars in charity. So imagine a merchant who sells in the hundreds every day; how much charity will be recorded for him with Allah the Exalted and Majestic, and he does not even notice it, while he profits materially more than the other merchants. Therefore, I hope that the day will come when these merchants and those who manage the banks, which they call Islamic banks, will abolish the profit in exchange for installments. Then they will be successful in this world and the Hereafter with Allah, Blessed and Exalted is He. This is the answer to this matter, which we have spoken about much and very much.

The questioner : Following up on this question, O our Shaykh, regarding the hadith or the other hadith you mentioned, which revolves around the two sales, they are saying now, because I was with them yesterday, they are saying, "We do not sell with two sales. We buy with one sale. We buy for cash, then we sell it to you on installments, and we hold this goods with us for five days or six days or a week, depending on the situation. Less than five days, they do not hold it; they register it in their name. For example, the car: they buy it for cash, then they keep it with them for five days to a week, then they sell it to you with one sale on installments for such-and-such an amount, where the profit percentage is less than the riba (usury or interest) percentage or the interest rate, which is called what is called eight percent increase over what they bought from the company for cash. They argue that this is one sale because they bought it for cash and sold it to you on credit on installments."

The Shaykh : This is known, my brother, but this is from the category of legal stratagems (hila) that they call it. If a man came and said, "I want this car for cash, at what price will they sell it?" At the installment price? Say no.

The questioner : Certainly, they will sell it for less.

The Shaykh : This is the matter of the two sales. When he (peace and blessings be upon him) said , he meant that a person offers goods for sale on the basis of two sales: either cash or installment. He sells these goods at two prices: the lower price is the cash price, and the higher price is the installment price. So when he says, "I do not sell with two sales," this is a case of closing one eye and looking at the issue with only one eye. I know that some later jurists say—and this is also looking at the subject with one eye—that if a merchant explicitly offers the goods for a hundred in cash and a hundred and twenty on installment, they say this is not permissible—may Allah have mercy on you. But if he says, "This is on installment for a hundred and twenty," they say this is permissible. Why? Because he did not mention the other sale, which is the cash sale. Glory to Allah! This is purely formalistic. When the Wise Lawgiver prohibited two sales in one sale, He did not intend or look at the form, but rather looked at the objective of usury. When they say that what is prohibited is presenting the form of two sales, even if the item ultimately ends up in one sale, and they say, "If you present one sale, there is nothing on you," they looked at the wording and did not look at the intended meaning of that wording. The wording , the wording , means that he has one of the two prices: the lower price, which is usually the cash price, and the higher price, which is usually the price of debt, i.e., installment. So if the seller directly offers the second sale, the one with the increase, and keeps to himself and the buyer the form of the first sale, which is the lower one, the prohibited thing has occurred in this form, which is the exact form mentioned in the hadith. This is the one who offers the second sale, saying, "A hundred and twenty on installment." If a man came and said, "I want to buy this for cash," he would say to him, "For a hundred." What is the benefit of keeping this to himself and not offering it in his speech, when the prohibited thing has already occurred, which is the increase in exchange for installment? This is exactly like many of the transactions from which the Lawgiver warned against engaging, such as, and unfortunately this occurs in some Islamic countries, what is known among jurists as the marriage of dissolution (nikah al-tahlil). The marriage of dissolution took this name from his saying (peace and blessings be upon him) . It is clear, if Allah wills, to all those present that the intended meaning of this hadith is that a man finds himself having divorced his wife with the third and final divorce, which is mentioned in His saying (Blessed and Exalted is He) . This man regrets it, but it is too late for regret. He regrets that his wife has left his control, against his will, by the law. So when can he be able to return her to his protection, so that she marries another husband, as is the text of the verse mentioned above? And then, if this other husband has a disagreement or conflict with her and divorces her afterwards, it is permissible for him to marry her. This is something many people cannot bear, so they play with the legal text and deceive it. They borrow a man and contract him to the divorced woman, not as the first husband contracted to her, i.e., to protect himself with her and protect her with him, but rather to dissolve her for the first husband. So he (peace and blessings be upon him) said . This is a very clear deception, because Allah the Exalted, when He mentioned in the previous verse , intended a lawful husband, and this dissolver is not a lawful husband. Are there not some legal opinions from ancient times that permit the marriage of dissolution? Unfortunately, this opinion exists. And more unfortunately, there are even today some scholars who issue fatwas permitting the marriage of dissolution. In fact, we know some of the muftis in Damascus who permit the marriage of dissolution. One of them used to say to some of his acquaintances, "I will dissolve her," meaning he was not ashamed that the well-known hadith, whose authenticity is established, would apply to him, which is that the Prophet (peace and blessings be upon him) named the dissolver the borrowed he-goat. This mufti and claimant of knowledge was content to be the borrowed he-goat. Why? Because he found in his school of jurisprudence one who permitted him the marriage of dissolution. Consequently, he says, "I am reconciling the two spouses, and I am concerned for the first divorced husband, so I am returning his wife to his protection." This is a type of playing with the legal rulings, and it is of the making of the Jews, whose story Allah the Exalted mentioned in the Noble Qur'an when He prohibited them from hunting on the day of Saturday. They deceived after enduring for a long time, deceiving this ruling of prohibiting hunting on the day of Saturday by confining the fish in the bays and catching them on Sunday. So Allah (Blessed and Exalted is He) cursed them, as mentioned in the Noble Qur'an. This is a matter known to many Muslims, even the common people, who hear the Qur'an and are reminded of this trick. But there is another trick of the Jews mentioned by the Messenger (peace and blessings be upon him) in an authentic hadith in "al-Bukhari and Muslim," or at least in one of them, which is his saying (peace and blessings be upon him) . What is the meaning of this hadith? Our Lord the Exalted also mentioned in the Noble Qur'an, saying . Among them were the fats. So one of the rulings revealed in the Shari'ah of Moses (peace be upon him) and his people, the Jews, was that when they slaughtered the fat, plump sheep, the red meat was lawful for them, and the white fat was prohibited for them . They continued with this ruling reluctantly for a period of time, then Satan whispered to them and made it attractive to them to deceive this ruling. So what did they do? They took these fats, which were prohibited for them to eat, sell, and buy, and threw them into the pots and lit the fire underneath them. They turned into a liquid, into a new form. With this change, Satan made it attractive to them and said to them, "This is something else, so it is not the fat prohibited for them in their Shari'ah." So they sold this fat and ate its price. The fat is fat, but the form changed. So Allah cursed them also for the deception mentioned in this hadith. Some Muslims today fall into many of the rulings that are prohibited by the Shari'ah because of changing the form, and as they say in some countries, changing the form for the sake of eating. So now, it is haram to say, "I will sell you this recorder for a hundred in cash and a hundred and ten, for example, on installment." This is not permissible. But if you say, "I will sell you for a hundred and ten on installment," this is permissible. What is the difference? The result is that he took the ten in exchange for installment, i.e., in exchange for not being patient with his brother in fulfilling and paying. So the form here is not looked at, but rather its outcome is looked at. Therefore, we say that those who eat riba, which is one of the major sins by the explicit text of the Noble Qur'an, because it is exposed to the war of Allah against it, and the explicit hadith is that the Prophet (peace and blessings be upon him) mentioned that eating riba is among the major sins. I believe that eating riba with deception is a greater sin than eating it without deception, because the one who eats it with a trick adds a sin to a major sin, so his sin is greater than the sin of the one who eats riba and says, "Allah will accept our repentance. What do we need to do? We need to live." Of course, these are excuses that have no value. But the important thing is that he admits that he is committing a prohibited act, so it is hoped that he will repent to Allah the Exalted one day. As for the one who says, "This is a sale and purchase," and argues with His saying (Blessed and Exalted is He) , this one will not repent from eating riba, because Satan has made his evil deed attractive to him, so he will not return to his Lord and not repent to Him. From here, some scholars rightly said that the crime of bid'ah (religious innovation) is greater than the crime of the prohibited act. From here, some scholars said that the crime of bid'ah is more sinful than the crime of disobedience. Why? They said because it is hoped that the sinner will repent, but the innovator, his tongue says, "My Lord, increase me. My Lord, increase me," because he thinks he is among those who think they do good. This meaning has come in a hadith from the rare hadiths with precise meaning, which is his saying (peace and blessings be upon him) . The legal ruling is that whoever repents, Allah accepts his repentance, whether he was a sinner or an innovator. So how did he say ? Here, the refusal is a natural refusal, meaning that naturally, this innovator does not repent because he is among those to whom their evil deeds have been made attractive, as Allah the Exalted said in the verse related to the disbelievers . So these, whether they are disbelievers or innovators, these and those, their evil deeds have been made attractive to them, and therefore it is not hoped that they will repent to their Lord. This is the meaning of the hadith . Likewise, whoever plays with a ruling of the Shari'ah, from the prohibited rulings, and makes this ruling attractive by changing it due to the playing mentioned, and deceives and makes it permissible, while in reality it is prohibited by the Shari'ah, but it has been made attractive to him by changing the form and appearance, taking the ruling from being prohibited to being permissible. This is like the innovator; it is not hoped for either of them that they will repent to Allah (Blessed and Exalted is He). From here, we advise every Muslim to be far, far away from playing with the rulings of the Shari'ah on one hand, and from falling into the bid'ah that they call the good bid'ah on the other hand, fearing that his evil deed will be made attractive to him, so he will not imagine that he will repent to his Lord one day. And this is the end of the answer to this question.