(5-2) Advancing Installments

(5-2) Advancing Installments

Question (1):

The bank intends to enter into a contract of Murabaha transaction with a client who desires to settle down the payment before the credit mature date... Is it permissible for the bank to make any discount from the specified amount?

Answer:

This discount is permissible provided that the customer should not stipulate such a discount as a condition if he advances payment as well as it should not have an oral or written correlation with the contract or after it, but must be at the discretion of the creditor only, i.e. without any oral or written condition.

Source:

Kuwait Finance House, Book of Fatwas on Economic Issues, part (1), and (2), Fatwa No. (99).

Question (2):

Is it possible to deduct a certain percentage out of the profit taken from the customer upon completion of the sale contract by the end of the term if the customer withdraws the goods and settled down the payment of the price prior to the end of the year. i.e. the return of a percentage of 1% or 2% of the profit as a gift (Hiba) or reward or the like as we took the value of the full year profit despite the fact that the duration of settlement is less than one year?

Answer:

• From the Shari'ah perspective: it is permissible to discount a portion of the profit for those who paid before the end of the term if there is no any prior oral or written agreement.

• From an administrative point of view: it is preferable not to do so in order to avoid defaming the reputation of Kuwait

Finance House and this should rather be replaced by reducing the rate of profit in a following transaction.

Source:

Kuwait Finance House, Book of Fatwas on Economic Issues, part (1), and (2), Fatwa No. (316).

Question (3):

Is it permissible for the bank to accept the repayment of indebtedness of customers before their maturity dates?

Answer:

The board opined that the bank may accept payment of the indebtedness of customers in Murabaha trading transactions before the due date of the installments, whether in whole or in part, against a waiver from the bank of some of its agreed upon profits provided that it should not be stipulated in advance at the time of contracting.

Source:

Fatwas of the Shari'ah Board of Qatar Islamic Bank, Fatwa No. (11).

Question (4):

The Bank entered into Murabaha transaction with a customer whereby it sold him a truck at an amount of 78 thousand pounds with a margin of profit amount to 14.040 pounds to be reimbursed over a period of 15 months, however, the customer offered to pay

28 thousand pounds, and wishes to pay all of it at once and requests from the Bank to calculate the profit based on the remaining indebtedness amount, hence is the Bank obligated to reduce its margin of profit?

Answer:

The bank is not from Shariah perspective or legally obliged to accept the offer made by the buyer, yet the Prophet calls for good treatment in such circumstances.

The Prophet (PBUH) said: " May Allah's Mercy be upon him who is lenient in his buying, selling and in demanding back his money." Hence, in order for the bank to deal in good and noble manners, it is better to consider this case because the theory which permits increasing the price in case of selling on credit is based on the fact that the seller has left his money for longer time in the hands of the buyer than on the spot selling and collection of price whereby he misses what could be accrued to the price if paid on the spot, therefore the Board recommends to observe this situation and reduce the margin of profit.

Source:

Shari'ah Board, "Fatwas ", Islamic Bank of Western Sudan, Fatwah No. (20).

Question (5):

Is it Shariah permissible to grant dealers with the bank some prizes if they paid their installments of the Murabaha before the maturity date without affecting the profit of the bank in the whole transaction?

Answer:

First: The prize of earlier payment is considered as waiver of a portion of the debt in return of its settlement before the maturity date. This is well-known in books of Islamic Figh as the rule of (Give discount and receive soon) i.e. waiver

a part of the debt and accelerate the payment before the maturity date.

Second: There is no disagreement between scholars about the permissibility of paying the debt before the maturity date upon the consent of the creditor and the debtor and the permissibility for the creditor to unconditionally waiver a portion of the debt to the debtor who paid the debt before the maturity date because it is not usury and does not contain any suspicion of usury. According to Majallat AlAhkam AlShariah", article (753), it is permissible for the debtor to pay more or less of his debt based on mutual consent or to increase or decrease in the amount or character without prior conditions or arrangement.

Third: As for the agreement between the creditor and the debtor (with a deferred debt) to repay the debt before its maturity date provided that the creditor write-off part of the debt, which is called (Give discount and receive soon) rule and the prize of earlier payment. This subject is one of the controversial issues among jurists. Nevertheless it has been mentioned at the start of the book of " Bidiat AL- Mojtahid" by "Ibn Rushd": P105, Second, that the Rule of (Give discount and receive soon) had been accepted by "Ibn Abbas" who is one of the Prophet's (PBUH) companions as well as some other jurists . It is also prohibited according to some others such as Ibn Omar (A Prophet's (PBUH) companion), Malik, Abu Hanifa, Al- Thawri and some other scholars. However, El Shafei opinion regarding this matter was different, whereas Imam Malik held it permissible. The view of those who deny the rule, is based on the fact that the debtor is paying earlier to obtain a write-off of a part of the debt and that is similar to increase the time and get more interest which is unanimously prohibited, hence the similarity is the

allocation to time part of the price in both cases. That is to say when time is increased or decreased the amount is relatively increased or decreased. Whereas the view of those who allow this arrangement is based on the Prophet saying (Hadith) which has been reported by Ibn Abbas that when tribe of "Banu Nadir" were banished from Madinah some of those people came to the Prophet (PBUH) and said "You have ordered to expel us, but some people owe us some debt which have not yet matured." Thereupon the Prophet (PBUH) said to them: (Give discount and receive soon). So the controversy is due to opposition of resemblance to this Hadith. According to the book of "Al- Moghni" by Ibn Kaddamah: (39): “If somebody had some deferred debt, and said to his creditor: "make discount out of it and I pay you the balance on the spot “ , which is not permissible. It has been disliked by Zaid Bin Thabit, Omar Ibn Al-Miqdad, Saeed Bin Mussayeb, Salem, Hammad, Al-Hassan, El Shafei, Malik, Haitham, Al-Thawri, Ibn ALiyah, Isaac and Abu Hanifa. Based on this prohibition, Al-Mekdad warned two men who practiced such action: allocation to time part of the price in both cases. That is to say when time is increased or decreased the amount is relatively increased or decreased. Whereas the view of those who allow this arrangement is based on the Prophet saying (Hadith) which has been reported by Ibn Abbas that when tribe of "Banu Nadir" were banished from Madinah some of those people came to the Prophet (PBUH) and said "You have ordered to expel us, but some people owe us some debt which have not yet matured." Thereupon the Prophet (PBUH) said to them: (Give discount and receive soon). So the controversy is due to opposition of resemblance to this Hadith. According to the book of "Al- Moghni" by Ibn Kaddamah: (39): “If somebody had some deferred debt, and said to his creditor: "make discount out of it and I pay you the balance on the spot “ , which is not permissible. It has been disliked by Zaid Bin Thabit, Omar Ibn Al-Miqdad, Saeed Bin Mussayeb, Salem, Hammad, Al-Hassan, El Shafei, Malik, Haitham, Al-Thawri, Ibn ALiyah, Isaac and Abu Hanifa. Based on this prohibition, Al-Mekdad warned two men who practiced such action:

Our opinion is as follows: First: No objection for investment sector to make a specific

discount for that debtor who paid earlier before the maturity date without prior agreement from the customer.

Second: That there is no objection for the sector to propose a general policy to be applied in all cases of earlier settlement of payment without concluding any agreement Second: That there is no objection for the sector to propose a general policy to be applied in all cases of earlier settlement of payment without concluding any agreement

Third: However, in special cases in which the interest of the bank is to collect its debts before the maturity date from some customers who deny that without being given specific discount then it is admissible to agree with the customer on this award on personal basis in accordance with the opinion of Ibn Abbas, Al-Nakhaai and Abi Thor; although majority of jurists are against this opinion because it is a controversial issue as it opposes the text of Hadith and due to the suspicion resemblance (as previously discussed).

Fourth: We hope to see the arrangement to be set by the sector prior to the start of its implementation.

Source:

International Islamic Bank, "Book of Shari'ah Fatwas on Banking Transactions", Publisher, Movement of Islamic Economy, Fatwa No. (5).