What the Islamic Banks Call it Murabaha and the Shari Ruling Regarding it

প্রশ্ন · Question

Assalamu Alaikum, We know that Murabaha as a concept is
permissible according to Sharia, but I believe that the current reality of
Murabaha in Islamic banks is contrary to the Sharia, especially with our
people here in Palestine, where the customer specifies the commodity
with the merchant and agrees with him on the price and concludes an
agreement with the bank and the bank buys the commodity and
delivers it to the customer and the bank mortgages the commodity,
whether an apartment, a car or otherwise. Its ownership is transferred
after paying the amount equal to the price of the commodity plus an
amount or percentage determined according to the payment period,
and the bank considers the added amounts as transaction costs…
Could you please clarify the Shari ruling pertaining such transactions?
May Allah bless you.

উত্তর · Answer

Wa Alaikum Assalam wa Rahmatullahi wa Barakatuh,
Your question includes three things:
First: Murabaha and its ruling...
Second: What Islamic banks call Murabaha...
Third: The issue of mortgaging the purchased commodity...
Here's the statement:
• With regard to the reality of Murabaha and its ruling, we explained
that in the Answer to Question dated 19 Rajab 1434 AH – 29 May
2013 CE, and the following came in the aforementioned answer:

[... Murabaha in the language means real profit, it is said: I sold the
good by Murabaha or I bought Murabaha. In technical terms: for the
seller to show the price he bought his products for sale and it should
be for a known profit, it is from the Trust Sales because it relies on the
trust of the seller in giving the information regarding what he paid for
the product. It is allowed in shar’ because it is the buying with a profit
on top of the cost price that the seller paid when he bought the
product. If th e seller says I will sell you this product with this much
profit of the price that I bought the product for and the buyer is made
aware of the price, and he accepts that, this is permitted because it is a
known sale] End.
• As for what was mentioned in your question about the so -called
Murabaha sale in Islamic banks, we have answered this issue in detail
on 24 Rajab 1434 AH – 03 June 2013 CE, and I repeat to you what
came in the aforementioned answer:
[... Islamic banks transactions which are called profit sales are
transactions contradictory to the Shari', as highlighted in the following:
First: The bank conducts the contract of sale with the buyer before it
buys the car or refrigerator. The Prophet ﷺ prohibited selling of that
which you do not own, from Hakeem Ibn Hizam, said: قَالَ: قُلْتُ: يَا رَسُولَ
بِيعُهُ مِنَ السُّوقِ فَقَالَ: لََ
َ
بِيعُهُ، ثُمَّ أ
َ
لُن ِي الْبَيْعَ، لَيْسَ عِنْدِي مَا أ
َ
تِين ِي الرَّجُلُ يَسْأ
ْ
اللَّهِ، يَأ تَبِعْ مَا
لَيْسَ عِنْدَكَ I said: "O Messenger of Allah, a man comes to me to buy (a
product), but I do not have what he asks for, I sell it to him later from
the market". He ﷺ said: "Do not sell that which you do not own" .
[Narrated by Ahmad]
This man asked the Prophet ﷺ about the buyer who comes to buy a
product from him which he does not have, so he goes to the market
and buys it then sells it to him. The Prophet ﷺ prohibited him from
this unless the product is with him and he presents it to the buyer, if
the buyer wishes to purchase or not.

To elaborate further: The one who asks the bank for a financial loan,
he will be questioned by the bank for the reasons for borrowing the
loan or money. The borrower will say that it is to buy a refrigerator or
car or washing machine, the bank will conduct the deal with him to
buy the product for him and then sells it to him in instalments for a
certain price.
This agreement becomes binding even before the bank purchases the
refrigerator for the person; the person cannot back down from buying
the refrigerator from the bank, because the agreement with the bank
has taken place before the product became the possession of the
bank, the contract is conducted before the bank owns the refrigerator.
It is incorrect to say that the bank sells the product to the buyer after
the bank have bought it, because the contract between the bank and
the buyer was conducted on a binding basis before the bank purchases
the product with the proof that the buyer cannot refuse to buy it after
it has been purchased by the bank for him, because the contract was
conducted on a binding basis before the bank have purchased the
product.
If the bank had a warehouse with products e.g. refrigerators inside and
it showcases them for the person then he chooses to buy or not just
like with any other sellers, then the sale in cash or in instalments is
permitted.
Second: It is not permitted to increase the value of the instalments if
the buyer delays the payment of one instalment, i.e. the value of the
debt increases; because this is Riba and it is called accrued interest
(riba an -nassi'a) and this was practiced during the Jahiliya time if the
time for payment arrived and the debtor was unable to re -pay due to
the assigned date and the increase in debt which Islam came to
prohibit absolutely, and granted the debtor who is facing hardship no
increase in the value of the debt

﴿ن تَصَدَّقُوا خَيْْ لهكُمْ إِن كُنتُمْ تَعْلَمُونَ
َ
وَإِن كَانَ ذُو عُشَّْةٍ فَنَظِرَةٌ إِلََٰ مَيْشََّةٍ وَأ ﴾
And if someone is in hardship, then [let there be] postponement
until [a time of] ease. But if you give [from your right as] charity, then
it is better for you, if you only knew” [Al-Baqara: 280]
According to what is mentioned above, this transaction with the bank
is not allowed] End.
• With regard to the issue of mortgaging the purchased commodity
until all installments are paid, we have answered that on 06 Sha'ban
1436 AH - 24/05/2015 CE in a detailed answer, which states:
[... This issue is known in Fiqh as “Withholding the Product (as a
Collateral) for its Price” i.e. that the product to be sold will be kept as a
security with the seller until the buyer pays its price. This situation
does not arise if the seller and buyer were of the character that the
Prophet ﷺ described in the Hadeeth extracted by Bukhari on the
authority of Jabir Ibn Abdullah (ra): «رَحِمَ اللَّهُ رَجُلًَ سَمْحًا إِذَا بَاعَ، وَإِذَا اشْي ََى،
وَإِذَا اقْتَض َ » “Allah’s mercy is on the well-mannered man when he sells,
buys, and take a loan”.
Whereas sometimes they differ around receiving the product first or
payment first, and the seller might withhold the product as collateral
until he receives its price, thus giving rise to this situation. The Fuqaha
differed regarding this issue, some permit it on conditions, and other
say it is prohibited, and there are some who permit it in some cases
and prohibit it in others... and so on.
After studying this issue my view is inclined towards the following:
First: Type of product
1. That the product is measurable, weighed, or planted...etc. like the
sale of rice, cotton, textiles...etc.
2. That the product is not measurable, weighed...etc., like selling of a
car, house, or animal...etc.

Second: Sales Price
1. Up-front i.e. in cash, like buying a product for ten thousand in cash
up front.
2. Deferred payment for a given period, like buying the product for ten
thousand but is paid after a year.
3. That some of the payment is paid up -front and the other part is
deferred, like buying the product with the first payment of five
thousand, and the other five is paid after a year for example, or is paid
in monthly installments.
Third: The Shariah ruling differs according to how the above matters
differ:
The first case: The product is not measurable and not weighted... such
as the selling of the house or a car or an animal:
1. The up -front payment, like buying a car for ten thousand in cash,
and that it is documented in the contract.
In this case, the seller may withhold the product, which remains with
him as a collateral until the up -front payment is made according to the
contract. The evidence for this is the Hadeeth narrated by Tirmidhi
which is classified a Hasan Hadeeth. On the authority of Abi Umamah,
he said: I heard the Prophet ﷺ say in the sermon in the Farewell
Pilgrimage: «العَارِيَةُ مُؤَدَّاةٌ، وَالزَّعِيمُ غَارِمٌ، وَالدَّيْنُ مَقْض ِي » “What is borrowed is
rendered, and the guarantor is responsible, the debt is paid.”
Zha’eem: guarantor, Gharim: liable, and the evidence is in his ﷺ
saying:
«وَالدَّيْنُ مَقْض ِي » “the debt is paid”. If the buyer receives the product
prior to paying the cost, it is buying on loan. And «وَالدَّيْنُ مَقْض ِي » “the
debt is paid” i.e. the priority is to pay the debt as long as long as the
purchase is in cash, in other words to pay the price first as long as the
price in the contract must be in cash up front ... Al -Kasaani says in

Bada’i As-San’i commenting on the Hadeeth (his saying (peace be upon
him) «وَالدَّيْنُ مَقْض ِي » “the debt is paid”, the Prophet (peace be upon
him) described the debt of being paid in general or Mutlaq, if the
payment is delayed for the delivery of the product then this debt is not
paid). This is contrary to the text.
Thus it is permissible for the seller to withhold the product until the
buyer pays its price, and so there will be no debt, and this is in
agreement with the contract because the sale was not by debt but in
cash.
2. The price is deferred, in the case of buying a car with ten thousand
which is paid after one year; in this case it is not permitted to withhold
the merchandise until the completion of the payment of the price
because the price is deferred in the contract by the seller’s approval.
He is not permitted to withhold the product to ensure the price
payment as long as he had sold it for a deferred price, so he annulled
his right to withholding the product, and therefore it is not permissible
for him to withhold the product, but should deliver it to the buyer.
3. The price can be both up-front and deferred, like buying the car with
the first five thousand paid off in cash, and the other five thousand
paid after one year at once, or paid later in installments.
In this case it is allowed for the buyer to withhold the product until the
up-front payment is received, after which he is not permitted to
withhold the product, because of the completion of the deferred
payment, this is for what we mentioned in the points 1 and 2.
In conclusion, it is permitted for the seller to withhold the product for
the up-front price payment, i.e. if in the contract it stipulates that the
payment is up -front and immediate, it is permitted for the seller to
withhold the product until the buyer pays off the up -front cost
payment according to the contract.

It is incorrect to ask how the buyer will withhold his product before
receiving it, i.e. before he owns it. This is because to hold a product as
collateral (Rahn) is not allowed except if it is allowed to be sold. Since
the product bought is not allowed to be sold except after receiving it
according to the Hadeeth of the Prophet ﷺ narrated by Al -Bayhaqi,
from Ibn Abbas who said:
The Prophet ﷺ said to I’taab Bin Usaid:
«ي قد بعثتك إلَ أهل الله، وأهل مكة، فانههم عن بيع ما لم يقبضوا
إب »
“I have sent you to the people of Allah, and the people of Makkah,
forbid them from selling that which they did not receive”
And the Hadeeth that was narrated by At -Tabarani from Hakeem Bin
Hizam that he said: O Messenger of Allah I sell using various
transactions, which is permissible for me and which is prohibited? He
ﷺ said: «لََ تَبِيعَنَّ مَا لَمْ تَقْبِضْ » “Do not sell that which you do not
receive.”
These Hadeeths clearly state the prohibition of selling that which is not
received, how is it then that the product is kept as collateral before it is
received?
This is incorrect because these two Hadeeths are for the products
which are measured and weighed... but if the product is other than
that like a house or an animal, then it is allowed to sell it before
receiving it based on the Hadeeth of the Prophet of Allah ﷺ narrated
by Bukhari from Ibn Umar (ra), he said, فَكُنْتُ عَلََ بَكْرٍ صَعْبٍ لِعُمَرَ، فَكَانَ
مَامَ القَوْمِ، فَيَْ ْجُرُهُ عُمَرُ وَيَرُدُّهُ، ثُمَّ يَتَقَدَّمُ، فَيَْ ْجُرُهُ عُمَرُ وَيَرُدُّ
َ
يَغْلِبُن ِي، فَيَتَقَدَّمُ أ هُ، فَقَالَ النَّنِْيُّ
صلَ الله عليه وسلم لِعُمَرَ
مِنْ رَسُولِ اللَّهِ صلَ الله عليه وسلم، فَقَالَ النَّنِْيُّ صلَ الله عليه وسلم
اللَّهِ بْنَ عُمَرَ، تَصْنَعُ بِهِ مَا شِئْتَ We were travelling with the Prophet ﷺI
was riding a rebellious camal’s calf that belonged to Omar, I could
not control it, it would precede the lines of, then Omar would yell at
it and push it back, this was repeated, then the Prophet ﷺsaid to

Omar: “Sell it to me”. So Omar said, “It is yours O Prophet of Allah,”
then I said to the ProphetﷺSell it to me” so He ﷺdid. The Prophet
ﷺsaid, “It is yours O Abdullah Ibn Omar, do what you please with
it”.
This action in the merchandise was as a gift before receiving it, which
shows the full ownership of the product before receiving it, and shows
that selling it is permitted because it was owned by its seller.
Hence it is allowed to hold a product as a collateral before receiving it
(cost payment), as long as it is allowed to be sold before receiving it,
but this is only if the product is non -measurable or weighed like a
house, a car, an animal, and so on. In case of conducting a purchase
contract of up -front payment or there is a sum of advanced payment,
then it is allowed to withhold the product as a collateral until receiving
the price, until the up -front payment or the lump sum of the up -front
payment is paid.
The Second Situation: the product is from the measurable and
weighed category, like buying amounts of rice, cotton, or textiles, in
this situation, it is prohibited to withhold the product for its price,
whatever the nature of the payment of the price may be: up -front or
postponed, or deferred payment in a lump sum or in installments:
If the price is up -front payment, it is prohibited to withhold the
product as we explained above.
If the price should be paid in advance, it is not allowed to withhold the
product, i.e. to hold it as collateral, because it is not allowed to hold
the measured or weighed products as a security before receiving the
price, according to the above -mentioned Hadeeth of the Prophet ﷺ .
In the case of the up -front payment, the buyer has to deal with it in
two ways:
Either to sell the goods in advanced payment and give it to the buyer
and have patience with the buyer, whether he gives the price in

advance or after a while without holding the goods as a collateral... or
not to sell the goods, i.e. without any collateral for the merchandise.
Thus if the measurable or weighed products are sold for the up -front
payment or deferred payment, it is not permitted for the seller to
withhold the goods as a collateral with him until the payment of the
price.
This is what I think is most preponderant and Allah Knows Best and is
Most Wise] End.
With all this, the answer to your question has been completed, and
Allah is the Grantor of success.
Your brother,
Abu Yasin
12th Muharram 1442 AH
31/08/2020 CE