Is the increase in installment sales usury or interest?
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Question:
I heard in one of the episodes of your program a question regarding the validity of raising the price of a specific item if it is sold on installment. I found it difficult to understand the answer. How is it permissible for a seller to raise the price of his goods for someone who wants to pay in installments, given that the price of the item is, for example, one hundred riyals? If he wants to sell it on installment, he sells it for one hundred and fifty riyals. Is this not similar to usury or interest, where if a person borrows one hundred riyals to meet a need, the lender conditions that he pay one hundred and fifty riyals in exchange for the delay? Please clarify this issue for me. May Allah reward you with good.
Answer:
The issue of installment sales is not of the same kind as usury or interest. Rather, people may trade with one another on credit for whatever they mutually agree upon. Installment sales differ; the installments may be numerous, requiring an increase in the price, or they may be few, with a small increase. Therefore, credit sales are not of the same kind as cash sales, and there is no blame on the majority of scholars, the consensus of the people of knowledge, in that there is no blame in the increase due to the delay. This is not usury or interest, due to the generality of the saying of Allah the Exalted and Majestic: [al-Baqarah: 282]. He did not say: at the current price, or at the spot price.
It has been the custom of the Muslims from the time of the Prophet (peace and blessings be upon him) until this day that sales on credit involve an increase. If the item is worth one hundred, he sells it for one hundred and twenty, one hundred and thirty, one hundred and forty, or one hundred and fifty, depending on the duration of the credit. If the credit period is short, the profit is small; if the credit period is long, the profit is large and the installments are numerous. The people of Barirah sold Barirah for nine ounces, one ounce each year, and the Prophet (peace and blessings be upon him) did not ask them: Is this her current price or not? Rather, the Prophet (peace and blessings be upon him) approved their sale of her on installment. Aishah also bought her on those terms and freed her, and he did not ask: Did you sell her at the current price or not? People continued to trade with one another during his time (peace and blessings be upon him), and he did not say to them: Do not sell except at the current price.
People borrow, and credit sales necessarily involve an increase. Without the increase, he would not sell on credit; he would sell for immediate payment to receive the price. But because of the increase, he grants him a delay. Thus, the buyer benefits from the item he bought at a deferred price, and the seller benefits from the increase he obtains through the credit sale. There is no blame in this. This is the position of the majority of the people of knowledge, and this is not usury or interest in any way. Yes.
The presenter: May Allah reward you with good, my brother (N. H. D). We will return to your questions in a future episode, if Allah wills.
I heard in one of the episodes of your program a question regarding the validity of raising the price of a specific item if it is sold on installment. I found it difficult to understand the answer. How is it permissible for a seller to raise the price of his goods for someone who wants to pay in installments, given that the price of the item is, for example, one hundred riyals? If he wants to sell it on installment, he sells it for one hundred and fifty riyals. Is this not similar to usury or interest, where if a person borrows one hundred riyals to meet a need, the lender conditions that he pay one hundred and fifty riyals in exchange for the delay? Please clarify this issue for me. May Allah reward you with good.
Answer:
The issue of installment sales is not of the same kind as usury or interest. Rather, people may trade with one another on credit for whatever they mutually agree upon. Installment sales differ; the installments may be numerous, requiring an increase in the price, or they may be few, with a small increase. Therefore, credit sales are not of the same kind as cash sales, and there is no blame on the majority of scholars, the consensus of the people of knowledge, in that there is no blame in the increase due to the delay. This is not usury or interest, due to the generality of the saying of Allah the Exalted and Majestic:
O you who have believed, when you contract a debt for a specified term, write it down.
يَا أَيُّهَا الَّذِينَ آمَنُوا إِذَا تَدَايَنتُمْ بِدَيْنٍ إِلَى أَجَلٍ مُسَمًّى فَاكْتُبُوهُIt has been the custom of the Muslims from the time of the Prophet (peace and blessings be upon him) until this day that sales on credit involve an increase. If the item is worth one hundred, he sells it for one hundred and twenty, one hundred and thirty, one hundred and forty, or one hundred and fifty, depending on the duration of the credit. If the credit period is short, the profit is small; if the credit period is long, the profit is large and the installments are numerous. The people of Barirah sold Barirah for nine ounces, one ounce each year, and the Prophet (peace and blessings be upon him) did not ask them: Is this her current price or not? Rather, the Prophet (peace and blessings be upon him) approved their sale of her on installment. Aishah also bought her on those terms and freed her, and he did not ask: Did you sell her at the current price or not? People continued to trade with one another during his time (peace and blessings be upon him), and he did not say to them: Do not sell except at the current price.
People borrow, and credit sales necessarily involve an increase. Without the increase, he would not sell on credit; he would sell for immediate payment to receive the price. But because of the increase, he grants him a delay. Thus, the buyer benefits from the item he bought at a deferred price, and the seller benefits from the increase he obtains through the credit sale. There is no blame in this. This is the position of the majority of the people of knowledge, and this is not usury or interest in any way. Yes.
The presenter: May Allah reward you with good, my brother (N. H. D). We will return to your questions in a future episode, if Allah wills.
Source
binbaz.org.sa
The Arabic text is copied verbatim from the original source, without any edits.