6

I'm sure not many people will agree to such a purchase, but if I went out and bought a phone for $500, with the intention of making a profit, and advertised it as:

Pay monthly installments for this phone (interest free) over 24 months for $36.87 a month.

Are such monthly payments an acceptable way of receiving money from a customer to pay for your goods according to Islamic rules? Keeping in mind that it's not a forced sale, i.e. the customer has 100% choice if he wants to go ahead with this or not.

Again, I understand that not many people will be interested in such a sale, and this question is not about if this business idea is a good business idea or a bad one. This question is simply asking, is such a sale compatible with Islamic laws?

  • @Ali, I'm not 100% sure if I should have. I think such a sale is acceptable according to the Shia belief system. But I'm not so sure if it's compatible with the Sunni belief system. – user3550 Jun 9 '13 at 16:57
  • islamqa.info/en/ref/1847 – Islam Jun 9 '13 at 17:02
  • @Ali, thanks for the link. Answers all the questions I had lined up after this one except 1. The fatwa mentions that you can stipulate some security as a guarantee that the buyer pays up. But it doesn't mention what kinds of securities/guarantees are acceptable? – user3550 Jun 9 '13 at 17:33
  • Maybe any security , most likely a govt registered transaction or say personal ID documents like passport, driving licence etc – Islam Jun 9 '13 at 17:40
2

If the price is known and fixed, and the only difference between it and a regular transaction is that it is payed in installments rather than as one lump sum (either up front or in advance), then there is nothing wrong with this transaction.

There is, however, a potential concern if you offer a better price for a lump-sum payment than for paying by installments (e.g. offering to sell the phone for either $750 up front or 24*$36.87 installments). In this case, you would be charging extra with nothing but time as a counter-value; some scholars consider such a transaction unlawful as riba, however many scholars (such as this example from the Hanafi school) still consider such pricing to be lawful as long as the price is agreed upon in advance.

  • +1: can you elaborate which scholars say its unlawful , any link? – Islam Jun 9 '13 at 17:44
  • @ali Don't have any references handy; it is a minority opinion. – goldPseudo Jun 9 '13 at 17:49
  • the minority opinion, given the reason sounds more convincing though as its like the user can invest 500$ and reap benefit due to the time value of money – Islam Jun 9 '13 at 18:00

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