What is the ruling on a trading company buying goods for a person and selling them to him on installments with an increase, and this person selling them to another on installments with an increase, and this other person borrowing from
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The questioner : May Allah honor you, peace be upon you and Allah’s mercy and blessings.
The Shaykh : And upon you be peace and Allah’s mercy, yes, peace be upon you and Allah’s mercy and blessings.
The questioner : A trading company that people visit with the intention of borrowing from it to buy some goods.
The Shaykh : What?
The questioner : To buy some goods, a trading company.
The Shaykh : Yes.
The questioner : People visit it with the intention of borrowing to buy some goods. The buyer visits them and tells them, for example, that he wants to buy a car. They pay him the price of the car and install the rest for him, meaning with the known increase. This first buyer then sells it to another buyer, and the second buyer turns to the same company to borrow from them with the intention of paying the price of this car. They also increase the installments for him. So now there are two buyers for one good, and this process goes through three or four people, while the one borrowing from is one, which is the company. What is the ruling on that, O Shaykh?
The Shaykh : This form of contract, or this method of contracting, is darknesses, some above others, and a stratagem against the prohibitions of Allah. It is well known that if I gave you forty thousand to be fifty thousand in one year, it is known to be riba without any doubt. So if you came to me wanting money but not wanting to say, “Give me forty thousand and I will give you fifty thousand in one year,” but instead you said, “I will buy you a car and then sell it to you at a price higher than the purchase price for the sake of installments,” and then you go and sell it to the first one or to someone else, there is no doubt that this is a very clear stratagem against riba. Instead of giving you forty for fifty in one year, you made this nominal purchase, which Allah knows, and the borrower knows, and you, the lender, know, and all creation knows, that the intention of this purchase is not a real purchase. Therefore, had it not been for the borrower’s request, you would not have gone to buy it. So this is a clear stratagem, and whoever does this has a resemblance to the Jews, may Allah keep us safe. Because the Prophet (peace and blessings be upon him and his family) said:.
And if the Jews, the Messenger (peace and blessings be upon him) cursed them and said: The Jews, when Allah prohibited them from fats, said: “Then we will not eat the fat, but we will melt it and sell it and eat its price.” This is the stratagem that the Jews made, and the Prophet (peace and blessings be upon him) prayed against them that Allah would fight them, because they are at war with Allah if they do this act.
Which is further from stratagem, the one you mentioned or the one the Jews made? The one the Jews made is further, because the Jews did not eat the fat nor sell the fat either; they melted it and then sold it and ate the price. But this one, instead of giving you forty thousand to be fifty thousand on you in one year, said: “We will buy this car” with absolutely no purpose; his only purpose is riba. So this stratagem, or this transaction, is forbidden for the lender and the borrower. And whoever does it must repent to Allah before death comes to him while he is engaged in this stratagem, may Allah protect us. And whoever repents, Allah accepts his repentance, because Allah said:[Al-Baqarah 2:279].
The Shaykh : And upon you be peace and Allah’s mercy, yes, peace be upon you and Allah’s mercy and blessings.
The questioner : A trading company that people visit with the intention of borrowing from it to buy some goods.
The Shaykh : What?
The questioner : To buy some goods, a trading company.
The Shaykh : Yes.
The questioner : People visit it with the intention of borrowing to buy some goods. The buyer visits them and tells them, for example, that he wants to buy a car. They pay him the price of the car and install the rest for him, meaning with the known increase. This first buyer then sells it to another buyer, and the second buyer turns to the same company to borrow from them with the intention of paying the price of this car. They also increase the installments for him. So now there are two buyers for one good, and this process goes through three or four people, while the one borrowing from is one, which is the company. What is the ruling on that, O Shaykh?
The Shaykh : This form of contract, or this method of contracting, is darknesses, some above others, and a stratagem against the prohibitions of Allah. It is well known that if I gave you forty thousand to be fifty thousand in one year, it is known to be riba without any doubt. So if you came to me wanting money but not wanting to say, “Give me forty thousand and I will give you fifty thousand in one year,” but instead you said, “I will buy you a car and then sell it to you at a price higher than the purchase price for the sake of installments,” and then you go and sell it to the first one or to someone else, there is no doubt that this is a very clear stratagem against riba. Instead of giving you forty for fifty in one year, you made this nominal purchase, which Allah knows, and the borrower knows, and you, the lender, know, and all creation knows, that the intention of this purchase is not a real purchase. Therefore, had it not been for the borrower’s request, you would not have gone to buy it. So this is a clear stratagem, and whoever does this has a resemblance to the Jews, may Allah keep us safe. Because the Prophet (peace and blessings be upon him and his family) said:
Do not commit what the Jews committed, so that you make lawful the prohibitions of Allah by the slightest of stratagems.
لا ترتكبوا ما ارتكبت اليهود فتستحلوا محارم الله بأدنى الحِيَلAnd if the Jews, the Messenger (peace and blessings be upon him) cursed them and said:
May Allah fight the Jews! Indeed, when the fats were prohibited for them, they sold them; they first melted them, meaning: they dissolved them, then sold them and ate their price.
قاتل الله اليهود! إنه لما حرمت عليهم الشحوم باعوها جملوها أولاً يعني: أذابوها ثم باعوها وأكلوا ثمنهاWhich is further from stratagem, the one you mentioned or the one the Jews made? The one the Jews made is further, because the Jews did not eat the fat nor sell the fat either; they melted it and then sold it and ate the price. But this one, instead of giving you forty thousand to be fifty thousand on you in one year, said: “We will buy this car” with absolutely no purpose; his only purpose is riba. So this stratagem, or this transaction, is forbidden for the lender and the borrower. And whoever does it must repent to Allah before death comes to him while he is engaged in this stratagem, may Allah protect us. And whoever repents, Allah accepts his repentance, because Allah said: