What is the ruling on installment sales with an increase in price?

The Shaykh : And in another hadith, the narrator of the hadith is Sammak ibn Harb, a Tabi'i, from Abdullah ibn Mas'ud, the noble Companion, about whom he (peace and blessings be upon him) said, meaning the recitation of Mas'ud's daughter. The narrator of the second hadith is Ibn Mas'ud, and from him is Sammak ibn Harb, the Tabi'i, from Ibn Mas'ud, who said, "It was asked of Sammak ibn Harb: What are the two sales in one sale? He said, 'That you say: I sell you this for such-and-such cash, and for such-and-such on credit.'" This is the installment sale that is widespread in our time, in which legal violations have become prevalent. He said, "What are the two sales in one sale? He said, 'That you say: I sell you this for such-and-such cash, and for such-and-such on credit.'" Cash for one hundred dinars, and on credit for one hundred and ten, or one hundred and twenty. This is the second hadith. Its benefit is twofold: the first is the prohibition of this sale, and the second is clarifying what the two sales in one sale are, where the narrator from Ibn Mas'ud explained it as an installment sale: I sell you this for one hundred cash, and for one hundred and ten or twenty on installments. The first hadith has a benefit that exceeds this hadith, because it shares with it in prohibiting the two sales in one sale, and it adds to it by permitting and facilitating this sale, because the first hadith prohibits, which implies invalidity. But this first hadith is a hadith of and it is from the hadith of Abu Hurayrah (may Allah be pleased with him), which implies that the sale is valid on the condition of not taking the increase. Otherwise, if the increase is taken, it becomes riba. That is, the lower of the two prices. Otherwise, it is riba. This device is one hundred dinars cash, and one hundred and ten on installments. When it is time to settle the account, he takes only one hundred from him, like a cash sale. If he takes the increase of ten, it is riba. This is what most merchants today fall into, who do not know how to sell except with two sales in one sale, or a single cash sale. Therefore, it is not permissible for a Muslim to exploit the buyer's need for installments by increasing the price in exchange for his patience in fulfilling his obligation to his Muslim brother. If he takes the increase from him, he has eaten riba. Our brother Abu Abdullah, may Allah reward him with good, points to a story I always mention on such an occasion. It is that one of the major merchants in Kuwait, before the calamity that befell them with the Iraqi occupation of their land, was informed of the prohibition of two sales in one sale. But it seems, and Allah knows best, I say now, that he was not informed of this prohibition in the detail you are hearing now, that the increase in exchange for installments is riba. So he was informed of so he stopped selling with two sales in one sale. But what did he do? He was, of course, like all merchants: some customers bought from him cash, and some bought on installments. And by the nature of commercial reality, cash is cheaper than installments. So he raised the cash price to the installment price. So before, he was wronging those who bought on installments, but now he is also wronging those who buy cash. For example, he used to sell the item for one hundred cash and one hundred and ten on installments. Now he sells at one price of one hundred and ten, not one hundred. The intention of the hadith is the exact opposite: the item you sell for one hundred cash, do not sell it for one hundred and ten on installments. So he went back to selling all items, in both the single sale and the two sales, with an increase in exchange for installments, the exact opposite of the legal ruling. Therefore, he assumed the best of him and said that, if Allah wills, first he sells with one sale, and second, it is not like that Kuwaiti.

The questioner : I say the operation that happens with us is as follows.

The Shaykh : I know, by Allah.

The questioner : I mean, what happens with us is that the one who buys refrigerators, for example, we buy the refrigerators for five hundred dinars. When we want to sell the refrigerator, we say it is five hundred and sixty dinars, so our profit is sixty dinars on this item. Naturally, the one who comes wants to take it in installments for twelve months or ten months in this way. But what exists in the country is that those who want to buy cash cannot find cash. They go to the country and sell it to them for five hundred and ten pounds, five hundred and ten, so that they get liquidity in it. We, for example, even if they gave us, for example, five hundred and fifty, it would not satisfy us, because we paid the rent expenses. We do not need this money. Is it that, for example, when I sell it for five hundred and fifty or five hundred and forty dinars, I say this is not cash? Cash, you pay five hundred and forty cash, or do you prefer to take it for ten months or eight months? You are free. I do not have two prices. I tell you, for example, five hundred and ten and five hundred and forty. I do not have five hundred and ten. I will not benefit from it. He says to me, five hundred and ten. He says to me, install it for me. Do I refuse this if he does not give me five hundred and ten? Okay, install it for me for ten months. When he does not agree to buy it cash from you, and you cannot possibly profit and put in a warranty for repair, and put in rent for workers and shop rents, this is something we are forced to say. For example, this is at the amount of profit, for example, five hundred and forty dinars. Do you prefer to take it cash? Pay the five hundred and forty dinars cash. Do you prefer I install it for you over ten months? The situation of it is that you pay, for example, one hundred dinars, and I install the rest for you over ten months. This is what happens with me.

The Shaykh : You install it for them based on what price?

The questioner : Based on five hundred and forty dinars. We do not have five hundred and ten.

The Shaykh : No, no, it is fine. Now, leave the major merchants to me, and let us talk about the merchants. I do not say the small ones, no, the merchants like your story, who do not have massive liquidity. Okay, if a man comes to you and says to you, I want to buy this refrigerator, and I do not have to pay you except ten dinars every month, or fifty, or one hundred, which is

The questioner : Yes.

The Shaykh : Do you sell it at the price he will pay you cash, or do you add an increase for him?

The questioner : No, there is no increase.

The Shaykh : There is no increase. Allow me to address your topic now. If we set aside the image of the Kuwaiti merchant, okay.

The questioner : Yes.

The Shaykh : We set aside that aspect. Your topic now falls into another chapter of jurisprudence, which is: Is the profit of the merchant in any goods he buys to trade in and profit from, fixed by Sharia, or not fixed? The answer is not fixed.