(16.4) Collusion to return the amount to the client minus a

(16.4) Collusion to return the amount to the client minus a

specific commission Question:

Murabaha transaction in the commercial sector is conducted through the following steps: it commences by the client goes to any local showroom in Kuwait and chooses the required commodity such as furniture, electrical devices or any other type of items and obtains the price offer that should be addressed by the exporter to the Kuwait Finance House. Thence after the Kuwait Finance House accepts to execute the transaction with the client; it purchases the goods in cash from the exporter based on inspection conducted by one of our representatives and thereafter resells it to the client in installments. However It was noted, and made sure that some clients agree with those showrooms to obtain cash money in lieu of goods in which case the client requests the showroom to send a fictitious offer to the Kuwait Finance House without any intention to get any goods or even part of it. They agree that after Kuwait Finance House purchases the goods, pay its price in cash to the showroom and resells it to the client, the Murabaha transaction in the commercial sector is conducted through the following steps: it commences by the client goes to any local showroom in Kuwait and chooses the required commodity such as furniture, electrical devices or any other type of items and obtains the price offer that should be addressed by the exporter to the Kuwait Finance House. Thence after the Kuwait Finance House accepts to execute the transaction with the client; it purchases the goods in cash from the exporter based on inspection conducted by one of our representatives and thereafter resells it to the client in installments. However It was noted, and made sure that some clients agree with those showrooms to obtain cash money in lieu of goods in which case the client requests the showroom to send a fictitious offer to the Kuwait Finance House without any intention to get any goods or even part of it. They agree that after Kuwait Finance House purchases the goods, pay its price in cash to the showroom and resells it to the client, the

Answer:

After the board was briefed on the administrative controls ( in four pages attached to the original copy of the minutes), which contains the practical means to detect cases of manipulation through conducting simulated sales, the board was of the view that the controls are good and varied, so the board replied: it is essential to make sure that the goods is received by the Kuwait Finance House from the trader, even if without transferring it, and make sure it is delivered to the client as precaution against the possibility of non- existence of the goods themselves.

Also resort shall be made to the method of "sale conditioned with option" for the Kuwait Finance House to avoid cases of clients' backing out of their promise to purchase from the Kuwait Finance House.

The board also recommended refraining from purchasing from individuals/companies involved in such collusion and conspiracy cases and refusing to deal with them for six (6) months until they correct their conduct.

Source:

Kuwait Finance House, Book of "Shari'ah Fatwas on economic Issues", part (1), and (2), Fatwa No. (350).

(16.5) Earnest money paid by the client to the exporter Question:

How can Kuwait Finance House be involved in a Murabaha transaction whereby the client has already paid an earnest money to the exporter?

Answer:

If a promising purchaser has paid an earnest money before his desire to deal with the Kuwait Finance House then it is impermissible for the Kuwait Finance House to be involved in such

a transaction unless such earnest money is recovered and the contract between the client and the exporter (if any) is terminated. This may be made by providing Kuwait Finance House with the letter of termination of this agreement including the recovery of the earnest money authenticated by witnesses.

This is in case of new dealers with Kuwait Finance House, but for old dealers who repeated this conduct, Kuwait Finance House shall not deal with them unless a period elapses during which they This is in case of new dealers with Kuwait Finance House, but for old dealers who repeated this conduct, Kuwait Finance House shall not deal with them unless a period elapses during which they

Source:

Kuwait Finance House, Book of "Shari'ah Fatwas on Economic Issues", part (1), and (2), Fatwa No. (95).

(16.6) Shipping of the goods on behalf of the client Question:

Kuwait Finance House ordered goods in its name from an exporter.

The exporter has shipped the goods in the name of the client (Promising Buyer) and not in the name of the Kuwait Finance House. What action can be done? Do we accept the process or not?

Answer:

It is not permissible as the goods must be in the name of the Kuwait Finance House, otherwise the whole process will become a mere financing and this is wrong.

The error shall be corrected by terminating all contracts issued or actions taken between the client and the exporter.

Then a new transaction shall be effected between the exporter and the Kuwait Finance House with precautions not to deal that way in the future.

Source:

Kuwait Finance House, Book of "Shari'ah Fatwas on Economic Issues", part (1), and (2), Fatwa No. (69).