Ruling on a bank paying the price of a commodity to the borrower and installmentizing the amount with an increase
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Question:
What is the ruling on dealing with agricultural banks in the following manner: if a person requests a tractor from one of the banks, the bank gives him the amount for the tractor so that he can take it from one of the companies, on the condition that he pays the amount to the bank in installments over a period of three years, with a known increase over the current price of the tractor. The question is: Is this considered riba, or is it a sale on credit? What is the ruling on credit sales? Is it forbidden or lawful?
Answer:
This is considered riba. If they give him money to buy the tractor, or a car, or something else, or a machine, on the condition that he returns more than what was given, then this is riba, and it is not permissible.
However, if the bank buys the commodity, such as a car or something else, or a tractor or a machine, and the bank takes possession of it and holds it, and then sells it to him in installments with known terms, then there is no harm in that.
Credit sales are permissible, and installment sales are permissible, provided that the item sold is owned by the seller and is in his possession, having been received and held by him, and then he sells it afterwards. This is what is permissible.
As for selling something that is with other people, or in the possession of merchants, that is not permissible; because the Messenger (peace and blessings be upon him) prohibited selling what a person does not own, and he said (peace and blessings be upon him):Sunan Ibn Majah 2187Hasan (Darussalam) And he said: .
Therefore, it is obligatory for the believer to beware of what Allah has forbidden, and not to sell something that is with other people. If he gives him a thousand on the condition that he returns a thousand and one hundred, or more or less, this increase is not permissible; it is riba, and it is not a sale. This is a loan, and it is called a loan.
A sale is when you buy the commodity from him personally. He sells it to you after he has taken possession of it and owned it. After that, he sells it for cash in advance, or on credit, or for cash and on credit. All of this is permissible, provided that the installments are known and clear, and the commodity is owned by the seller and is in his possession, having been received and held by him. Then there is no harm in that.
The presenter: May Allah reward you with good.
What is the ruling on dealing with agricultural banks in the following manner: if a person requests a tractor from one of the banks, the bank gives him the amount for the tractor so that he can take it from one of the companies, on the condition that he pays the amount to the bank in installments over a period of three years, with a known increase over the current price of the tractor. The question is: Is this considered riba, or is it a sale on credit? What is the ruling on credit sales? Is it forbidden or lawful?
Answer:
This is considered riba. If they give him money to buy the tractor, or a car, or something else, or a machine, on the condition that he returns more than what was given, then this is riba, and it is not permissible.
However, if the bank buys the commodity, such as a car or something else, or a tractor or a machine, and the bank takes possession of it and holds it, and then sells it to him in installments with known terms, then there is no harm in that.
Credit sales are permissible, and installment sales are permissible, provided that the item sold is owned by the seller and is in his possession, having been received and held by him, and then he sells it afterwards. This is what is permissible.
As for selling something that is with other people, or in the possession of merchants, that is not permissible; because the Messenger (peace and blessings be upon him) prohibited selling what a person does not own, and he said (peace and blessings be upon him):
Do not sell what is not with you.
لا تبع ما ليس عندكIt is not lawful to combine a loan with a sale, nor to sell what you do not have
لا يحل سلف وبيع، ولا بيع ما ليس عندكTherefore, it is obligatory for the believer to beware of what Allah has forbidden, and not to sell something that is with other people. If he gives him a thousand on the condition that he returns a thousand and one hundred, or more or less, this increase is not permissible; it is riba, and it is not a sale. This is a loan, and it is called a loan.
A sale is when you buy the commodity from him personally. He sells it to you after he has taken possession of it and owned it. After that, he sells it for cash in advance, or on credit, or for cash and on credit. All of this is permissible, provided that the installments are known and clear, and the commodity is owned by the seller and is in his possession, having been received and held by him. Then there is no harm in that.
The presenter: May Allah reward you with good.
Source
binbaz.org.sa
The Arabic text is copied verbatim from the original source, without any edits.