What is the ruling on Abu Dhabi Islamic Bank purchasing shares for a specific amount, then selling them to me in monthly installments over one year for a higher price, while providing me with a share ownership certificate and a schedule of the companies selling these shares?
This transaction is based on two principles: Tawarruq, which is buying a commodity for a deferred price and then selling it for cash to another party at a lower price. This is permissible according to the majority of scholars. The second principle is Murabaha to the one who commands the purchase, which is the bank buying a commodity requested by the customer and then selling it to him at a higher, installment-based price. This is permissible under the following conditions:
1. The bank must genuinely own the commodity before selling it to the customer. 2. The customer must genuinely own the commodity and take possession of it from the bank before selling it. 3. The customer must not sell the commodity back to the bank or to the original seller from whom the bank purchased it, to avoid the forbidden 'Inah transaction. 4. The contract between the bank and the customer must not include a penalty clause for late installment payments, to avoid Riba (usury). 5. If the commodity consists of shares, it is a condition that these shares belong to companies that do not engage in forbidden dealings.
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