(5 – 3) The Condition of Delay Penalty

(5 – 3) The Condition of Delay Penalty

Question:

Please provide Shari'ah opinion about the following:

A bank client has submitted his application to purchase a house in the amount of 250.000 pounds provided that the bank sell same property to the client in form of Murabaha in the amount of 265.000 pounds to be paid by the client after one month as of the date of the sale of the bank's property to the client. The client may mortgage same to the bank until he settles down the value of the property?

Answer

The application contains two aspects: a promise to purchase and selling in Murabaha mode. This is the correct interpretation of the application text, as the applicant promised to buy the property, in mode of Murabaha from the bank and asked the bank to purchase the house from its current owner at value of 250.000 pounds provided that the promising buyer will pay an amount of 265.000 The application contains two aspects: a promise to purchase and selling in Murabaha mode. This is the correct interpretation of the application text, as the applicant promised to buy the property, in mode of Murabaha from the bank and asked the bank to purchase the house from its current owner at value of 250.000 pounds provided that the promising buyer will pay an amount of 265.000

Promise to purchase is permissible and subsequently binding the promising buyer according to the following details. Selling in Murabaha mode is permissible and the above mentioned profit albeit inconsiderable relative to the value of the house, it is also Shariah permissible, as well as the board see the permissibility of the promise to purchase based on sayings of jurists, which are summarized as follows:

First: Promise is not binding. Second: Promise, in view of Maliki Jurists, would be binding, if

the promising reason has been specified. Third: Promise, based on the view Asbagh, a Maliki Jurist and Ibn

Shibrimah one of the Mugtahideen, is absolutely binding. Fourth: The conferees, including the representatives of the Islamic

banks, discussed the subject of promise to purchase and banks, discussed the subject of promise to purchase and

The board is applying in its current Shari'ah opinion, and persists in its future advisory opinions on binding the promising buyer to consummate the purchase after the arrival of the commodity and to give him the right of option, provided that he has to pay all expenses incurred due to his promise or all costs that the bank would not have incurred if not being promised.

Accordingly it is permissible for the bank to buy the house at amount of 250.000 pounds based on a promise from Mr. Ali Mohamed Al-Hassan AbdulSalam and that the bank to sell to him the house at a profit of 17.000 pounds and settle the amount after a maximum period of three months from the date of sale.

This Transaction is Shariah permissible with the following notes: (1) We have approved the Form of Promise to Purchase, which

contains clauses that stipulates the approval of the promising buyer to pay a certain percentage of the value as collateral to prove his seriousness in execution of his contains clauses that stipulates the approval of the promising buyer to pay a certain percentage of the value as collateral to prove his seriousness in execution of his

(2) We have noticed in the draft agreement, regarding the terms and conditions of the purchase of the house by the bank and commitment of the promising buyer to buy, that the sixth paragraph set forth a penalty condition that enjoins on the buyer to pay an amount of five thousand pounds for each month elapses after the end of the period specified to purchase the house, this condition is not permissible in such an agreement because it includes an increase to the amount which binds the buyer and already is agreed upon as well as it is of the same kind of the debt and increases in accordance with the length of delay period in which the client has not settled the required amount, hence such increment falls within the prohibited usury. So we do not agree with the existence of paragraph (6) in the agreement that contains this clause.

We prefer to replace the paragraph with a text in which the bank is entitled to sell the house to who ever wishes to buy it as well as the promising buyer has to bear any differences, expenses or decrease in value caused by his promise to purchase, according to which the bank entered into the given transaction.

Source:

Resolutions of the Shari'ah Board of Islamic Bank of Sudan, Question No. (28).

(5–4) Long Delay of payment after the Date of Selling the Goods

Question:

A client requested to engage with the bank in a transaction of Murabaha to import fabrics for both sexes provided it pays the value over a period of three years whereas the sale of these goods will be executed within (3-6 months) only?

Answer:

There is no objection from Shari'ah point of view to be engaged in such transactions and that the decision is up to the management of the bank in terms of studying the market conditions, availability of liquidity, the possibility of financing and the applicable terms for payment in such cases.

Source:

Fatwas of the Shari'ah Board of Qatar Islamic Bank, Fatwa No. (20).