(8.7) Determination of the percentage of profit in the purchase

(8.7) Determination of the percentage of profit in the purchase

promise Question (1):

Please provide Shari'ah opinion regarding the addition of a paragraph to the purchase promise that determines the percentage of profit to be agreed upon by the two parties at the conclusion of the sale contract?

Answer:

The board looked into the wording of the promise to purchase used by the company up-to-date and decided to redraft the promise to purchase form and include the request of the company with regard to determination of the percentage of profit, and the board also introduced some changes to the above mentioned form and approved it as in the format annexed to this resolution and hence the company shall replace the old form of promise to purchase with this attached form.

Source:

Shari'ah Board, "Collection of Shari'ah Fatwas", Al-Rajhi Banking & Investment Company, Resolution No. (60).

Question (2):

Is it permissible for Kuwait Finance House to enter into a Murabaha sale at a percentage of profit to be agreed on delivery date?

Answer:

It is impermissible to carry out such transaction due to the ignorance which leads to the dispute because of the ambiguity in price due to ambiguity of profit.

Source:

Kuwait Finance House, Book of Fatwas on Economic Issues, part (1), and (2), Fatwa No. (103).

(8.8) Increasing the margin in return for deferral of payment Question:

Please provide Shari'ah opinion in case of increasing the price in return for the defer of payment in the event of the arrival of the goods and prior to the preparation of Murabaha contract and delivery of documents and goods to the client?

Answer:

It is not permissible to increase price, in this case, in return for the increase of the tem of payment and the client should abide by the provisions of the promise to purchase because the bank is following the principle that the promise of purchase is binding.

Source:

Fatwas of shari'ah Board of Qatar Islamic Bank, Fatwa No. (15).

(8.9) Postponing the specification of the profit ratio Question:

Is variation in the determination of profit ratios permissible based on their nature as capital profits or operational income?

Answer:

If the subject of Mudharabah is assets that generate income, then it is permissible for the Mudharib and the capital owner to agree on dividing this income between them in specific ratios under account and to agree on different ratios in case of sale of the assets. However, if the assets are sold at a price less than its purchase price then the difference shall be offset from the operational income.

Source:

Dallah Al-Barakah Group, Development and Research Department, Resolutions & Recommendations of AlBaraka Symposia on the Islamic Economy, (First, Second and Third Seminars), Fatwa No. (4).

(8.10) Receiving a percentage from the profits of the client company

Question:

In the event that Kuwait Finance House sold equipment to an industrial company in mode of Murabaha; is it permissible for Kuwait Finance House, in addition to the selling price, to receive specific percentage out of the annual profits of this company, considering that Kuwait Finance House is not a partner to this company?

Answer:

The Committee opines that the first part of the question, which is the selling of the equipment in Murabaha mode to the industrial company, is Shari'ah permissible.

However the second part of the question, concerning receiving a percentage out of the profits of that company, is Shari'ah impermissible because the equipment and generated profits thereby have become the exclusive property of that company and Kuwait

Finance House has nothing to do or has no relation to this company.

Source:

Kuwait Finance House, Book of Fatwas on Economic Issues, part (1), and (2), Fatwa No. (123).