A merchant takes his money from the bank at a reduced interest rate, and then the bank collects this money from the companies the merchant deals with at an increased rate; what is the ruling?
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The questioner : Shaykh, may Allah reward you with good. I am a merchant, so I sell my goods to institutions, companies, or associations, and then I receive this money after several months, five or six months, and sometimes this period extends, so my money remains frozen with these companies. Sometimes, the Islamic banks here pay me this money immediately, minus the value of the interest. For example, if it is one hundred dinars, the bank gives me ninety-five dinars, and the bank collects it from this merchant in the future. So I benefited from it by getting my money back immediately instead of waiting six months, and this method...
The Shaykh : ...and the bank benefited from the increase.
The questioner : The bank benefited from the increase, and I benefited by receiving my money immediately.
The Shaykh : Yes, this contains two prohibitions. The first prohibition is riba (usury or interest), because the bank gave you ninety-five for one hundred, and this is explicit riba. It also contains riba al-fadl (usury of excess in a like-for-like exchange) and riba al-nasi'ah (usury of deferment), meaning the riba of increase and the riba of delay, because the bank will delay its collection of this compensation. The second prohibition is selling what you do not have and what is not in your possession, because you sold what is in the debt of this bank.
The questioner : ...
The Shaykh : Yes, you sold it now to Zayd, to this company. What is in its debt, for example, are dinars or not?
The questioner : Yes
The Shaykh : You sold the dinars to the bank before you received them and before they became your property, so it contains two prohibitions. If this matter has already passed, it is obligatory to repent to Allah (Mighty and Majestic) and not to return to such a transaction. If it has not happened, it is obligatory for you not to enter into this. Yes.
The Shaykh : ...and the bank benefited from the increase.
The questioner : The bank benefited from the increase, and I benefited by receiving my money immediately.
The Shaykh : Yes, this contains two prohibitions. The first prohibition is riba (usury or interest), because the bank gave you ninety-five for one hundred, and this is explicit riba. It also contains riba al-fadl (usury of excess in a like-for-like exchange) and riba al-nasi'ah (usury of deferment), meaning the riba of increase and the riba of delay, because the bank will delay its collection of this compensation. The second prohibition is selling what you do not have and what is not in your possession, because you sold what is in the debt of this bank.
The questioner : ...
The Shaykh : Yes, you sold it now to Zayd, to this company. What is in its debt, for example, are dinars or not?
The questioner : Yes
The Shaykh : You sold the dinars to the bank before you received them and before they became your property, so it contains two prohibitions. If this matter has already passed, it is obligatory to repent to Allah (Mighty and Majestic) and not to return to such a transaction. If it has not happened, it is obligatory for you not to enter into this. Yes.