What is the ruling on the following transaction: A client comes to the Islamic bank and says to them, “I have found a specific item, such as a car, at such-and-such a company that is offering it for sale for a cash price of two thousand dinars, and I want you to buy it and then sell it to me for a fixed term in the form of installments, knowing that the amount will be more than the price the company paid to purchase it?”

The questioner : O Shaykh, one of the transactions in which Islamic banks currently deal is the Kuwaiti Finance House and the sale of murabahah.

The Shaykh : Very well.

The questioner : And their method proceeds as follows:

The Shaykh : Please go ahead.

The questioner : That the client comes to the Islamic bank

The Shaykh : Yes, that is right.

The questioner : and says, “I have found, for example, a specific item, which might be a car,

The Shaykh : Yes.

The questioner : at such-and-such a company, and the company is offering it for sale for a price of two thousand dinars

The Shaykh : in cash?”

The questioner : In cash.

The Shaykh : Very well.

The questioner : So I want you to buy it and sell it to me for a fixed term, and I will pay you, for example, a down payment of part of the amount, and the rest will be in the form of installments to be paid off after three or four years.

The Shaykh : Yes, that is right.

The questioner : An amount greater than the amount for which it was purchased.

The Shaykh : Yes, that is right.

The questioner : Is this permissible in the Shari'ah?
Another questioner: O Shaykh, this falls under the issues, of course.

The Shaykh : The item... meaning the exit... the issue has multiple forms.

The questioner : Yes

The Shaykh : Yes, in what you think, what did you call the house?

The questioner : The Kuwaiti Finance House.

The Shaykh : This Kuwaiti Finance House.

The questioner : Yes

The Shaykh : The car was valued at two thousand

The questioner : Yes

The Shaykh : in cash.

The questioner : Yes

The Shaykh : Okay, how much does the Finance House buy this car from the agency for?

The questioner : For this amount, or perhaps they get a discount and tell me that I have obtained a discount of, for example, one hundred dinars.

The Shaykh : Assume they bought it for two thousand.

The questioner : Yes

The Shaykh : Good.

The questioner : Good.

The Shaykh : How much does he sell the car to you for?

The questioner : For two thousand, let us assume, plus five hundred dinars.

The Shaykh : Okay, for what does he take these five hundred dinars from you?

The questioner : In exchange for this term.

The Shaykh : This is forbidden, this is riba. Leave the Finance House aside for now.

The questioner : Yes

The Shaykh : Good.

The questioner : Yes

The Shaykh : You went directly to the company and said, “I want this car, I will buy it.” They told you, “Cash for two thousand, or installments with an increase of five hundred over two years.” What is the ruling on this increase? Do you know? Do you know the ruling? You do not know? It is riba, it is riba, by his saying (peace and blessings be upon him) “The Messenger of Allah (peace and blessings be upon him) prohibited two sales in one sale” and in a wording “two transactions in one transaction”. It was said to its narrator, Sammak ibn Harb, “What are two sales in one sale?” He said, “That you say, ‘I sell this to you for such-and-such in cash, and for such-and-such on credit.’ I sell this to you for such-and-such in cash, and for such-and-such on credit.” This is what the Messenger (peace and blessings be upon him) prohibited when he prohibited two sales in one sale. This hadith is known among the scholars, but they differed in its interpretation. The majority, unfortunately, interpreted it to mean that the prohibition is due to the lack of clarity of the price between the two prices. And I believe this is an error, an error in understanding the hadith and in our looking at the reality of those who trade with two sales in one sale. As for the hadith, the first hadith I mentioned clarifies that the cause is not the ambiguity of the price fluctuating between the installment price and the deferred price, but rather that there is riba. This is an important point that you must know and memorize. , meaning the increased price is riba if he takes it. If he takes the first price, it is the lawful, and that is what Allah intended This is from the perspective of the Shari'ah meaning of the prohibition of two sales in one sale. Then, when we come to reality, as we said earlier regarding the car issue, Zayd from among the people went to the company, “I want this car.” They said, “Cash for two thousand, or deferred for two years for two thousand plus five hundred.” What will happen is one of two things, without any doubt or doubt at all: either he pays the two thousand in cash and takes the car, or he does not pay in cash, but perhaps the first installment is deferred, or perhaps he pays nothing until a week or, according to what they agree upon. In that case, they record checks as they say, or promissory notes, or something similar. Where is the ambiguity in the price? There is no ambiguity in the price. They separated without a clear indication of the price, especially in the first case when the cash price was offered to him and he was told, “Please, here it is.” Where is the ambiguity? And in the other case as well, when he did not pay the price in cash but it was recorded against him, and they took his address and phone number, etc., where is the ambiguity in the price? The truth is, I am amazed at the contemporary scholars today, how they justify this hadith that the prohibition in it is due to the ambiguity fluctuating between the two prices. It is not known for what they separated. ... It is certainly known that they separated either on the cash price that he paid to the merchant, or the installment price that they agreed to pay him in separate periods. So there is nothing in the hadith, neither from the perspective of combining the texts nor from the perspective of reality, that indicates that the prohibition of two sales in one sale is due to the ambiguity of the price on which they separated. If we know this issue with its Shari'ah evidence, and it becomes clear to us that the merchant is not allowed to take five hundred dinars here as an increase in exchange for what? The patience of the buyer in fulfilling the payment. So when a bank from the banks called today Islamic banks enters as an intermediary, what is the difference between taking this increase, whether the merchant who owns the car agency eats it as riba, or the intermediary, which is the bank, ... for making lawful what Allah has forbidden of riba. Is this the last question?

The questioner : No, there is, O our Shaykh... .

The Shaykh : ... O Abu 'Abdillah.

The questioner : Shaykh, there is a second issue.