What is the ruling on usurious transactions that take place between a bank and a client, where the bank purchases a property at the client's request and then sells it to him with an annual profit of 5%, and the client repays the amount and the profits through a monthly deduction from his salary?
There is no objection to (cost-plus financing) in the described format, as long as the bank first purchases the property and then sells it to the customer who ordered the purchase after taking possession of it, based on the Almighty's saying: "And Allah has permitted trade." The increase in profit due to installment payments is permissible because time has a share in the price. It is imperative to sever all ties between the customer and the original seller, and to nullify any prior contractual connection between the customer ordering the purchase and the original seller, so that the transaction does not devolve into an interest-based loan. It is also a condition that the contract be free of late payment penalties.
Summary from Ftawy's records · added here
Reviewed by El Fatwa's sharia committee.
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- 159689
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- Summary from Ftawy's records, reviewed by El Fatwa's sharia committee.
- Read the full ruling
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