(5–5) Deferred Installments Paid in Foreign Currency and

(5–5) Deferred Installments Paid in Foreign Currency and

Determination of Exchange Rate on the date of Arrival of Documents

Question (1):

Is it permissible for the Islamic Bank to conclude an agreement with its client in order to pay the debt of Murabaha in another currency at the rate prevailing on maturity date?

Answer:

Based on the evidence presented by the Director of the Bank who submitted this question and stated that the selling will be conducted in a foreign currency and the client is obliged to pay in the same currency, hence the payment of this obligation on the maturity date at a value equivalent to the local currency according to the exchange rate prevailing thereat would be permitted and no objection from the standpoint of Shari'ah perspective because it is purely an offset between the due debt that is fixed and (constructively possessed) in foreign currency and the local Based on the evidence presented by the Director of the Bank who submitted this question and stated that the selling will be conducted in a foreign currency and the client is obliged to pay in the same currency, hence the payment of this obligation on the maturity date at a value equivalent to the local currency according to the exchange rate prevailing thereat would be permitted and no objection from the standpoint of Shari'ah perspective because it is purely an offset between the due debt that is fixed and (constructively possessed) in foreign currency and the local

Source:

Dalah Al-Barakah, Department of Development and Research, Resolutions & Recommendations of AlBaraka Symposia on the Islamic Economy, Al-Barakah First Symposium, fatwa No. (5).

Question (2):

Some clients request from the bank to purchase, in mode of Murabaha, some goods imported under documentary credits; provided the Bank pay the price of the goods under scheduled time drawdowns in foreign currencies (dollar or sterling pound, for example) after the period of time agreed upon with the seller (three months or six months, for example) as of the date of receipt of the documents by the bank.

Please advise the Shari'ah point of view on the permissibility of selling the goods in Murabaha to the purchase orderer for which the bank agrees with the seller to pay the price thereafter in dollar Please advise the Shari'ah point of view on the permissibility of selling the goods in Murabaha to the purchase orderer for which the bank agrees with the seller to pay the price thereafter in dollar

Answer:

Regarding the Shari'ah opinion on the sale of goods in mode of Murabaha to the purchase orderer whereas the Bank agreed with the seller (the exporting company) to pay its value deferred thereafter in dollars or sterling pounds in accordance with the prevailing rate thereat upon the maturity date. The bank wants to agree with the purchase orderer to determine the price according to the value of the foreign currency on the arrival of the documents … etc, and based on the fact that the sale of Murabaha in order to be valid requires that the seller and the buyer upon conclusion of the contract have to know the capital / price and the profit, and that each of them has to know the resulting cost, if any, and that in this case neither the seller (the Bank), nor the buyer (the purchase orderer), at the time of making the contract of Murabaha sale, know specifically the real price, and both of them do not know the Regarding the Shari'ah opinion on the sale of goods in mode of Murabaha to the purchase orderer whereas the Bank agreed with the seller (the exporting company) to pay its value deferred thereafter in dollars or sterling pounds in accordance with the prevailing rate thereat upon the maturity date. The bank wants to agree with the purchase orderer to determine the price according to the value of the foreign currency on the arrival of the documents … etc, and based on the fact that the sale of Murabaha in order to be valid requires that the seller and the buyer upon conclusion of the contract have to know the capital / price and the profit, and that each of them has to know the resulting cost, if any, and that in this case neither the seller (the Bank), nor the buyer (the purchase orderer), at the time of making the contract of Murabaha sale, know specifically the real price, and both of them do not know the

Source:

Jordan Islamic Bank for Finance and Investment, Book of Fatwas, Parts (1), (2), Fatwa No. (34).