Islamic Rulings on Trade

Mufti Abu Muhammad Ali Asghar Attari Madani

1. Opening a savings account in an interest-based bank with the intention of contributing to charity

Q: What do the scholars of Islam say about the following matter: We were informed that opening a current account with a conventional bank is allowed, but not a savings account. Could you clarify if it is permissible to open a savings account in a conventional bank with the purpose of donating the received surplus funds to charitable causes? 

اَلْجَوَابُ بِعَوْنِ الْمَلِکِ الْوَھَّابِ اَللّٰھُمَّ ھِدَایَۃَ الْحَقِّ وَالصَّوَابِ

A: Opening a savings account in a conventional (interest-based) bank is haram and a sin, as the money deposited is akin to a loan from the account holder to the bank, which the bank repays with an additional benefit, i.e., interest. Receiving any type of benefit in addition to the loan has been declared as usury in the noble hadith. For example:

کُلُّ قَرْضٍ جَرَّ مَنْفِعَۃً فَھُوَ رِبًا

“Every loan that incurs a benefit is usury.”[1]

When a person opens a savings account in an interest-based bank, some money must be deposited into it, and like this, the usurious dealings commence. This is despite the fact that giving and receiving interest is haram and a sin, and there are severe warnings relating to it.

It is mentioned in a hadith:

لعن رسول اللہ صلی اللہ تعالیٰ علیہ وسلم اٰکل الربا و موکلہ و کاتبہ و شاھدیہ و قال ھم سواء

“The Messenger of Allah صَلَّى الـلّٰـهُ عَلَيْهِ وَاٰلِهٖ وَسَلَّم cursed the one who consumes usury, provides it for consumption, writes the usurious contract, and its witnesses. And he said, ‘They are equal ˹in sin˺.’”[2]

Therefore, it is not permissible to open a savings account in a usurious bank, even if one intends to give the extra money received to charity.

2. Buying a mobile phone on instalments and selling it to the same shop owner for cash

Q: What do the scholars of Islam say about the following matter: We engage in buying and selling through instalment plans. Occasionally, a customer expresses interest in acquiring a mobile phone on instalment and then reselling it due to his financial needs. 1. Can we sell an item to a person who does not intend to use it, rather intends to sell it on?

2. After having sold an item to the customer on instalments, can the shopkeeper buy it back from him for a lesser amount in cash?

اَلْجَوَابُ بِعَوْنِ الْمَلِکِ الْوَھَّابِ اَللّٰھُمَّ ھِدَایَۃَ الْحَقِّ وَالصَّوَابِ

A:

1. When the customer has purchased an item, he has become its owner. He has the choice of selling it on, gifting it, or using it. So selling it to him on instalments is permissible.

It should be remembered that trading on the basis of instalments is in essence a form of trading on the basis of credit where an item is sold at a higher price in comparison to a prompt cash payment, and the price is paid in instalments. Islamic law permits sellers to sell items for different prices, subject to whether the customer pays immediately or in instalments. Therefore, buying and selling in instalments is also permissible when the price of the item and the payment period is fixed at the time of the transaction.

Nevertheless, if any prohibited stipulation is introduced within such dealings, the transaction becomes compromised (fāsid). For instance, including a condition requiring the buyer to pay a monetary penalty for late payments. This is due to the fact that monetary penalties are prohibited in Islamic law. Consequently, due to this invalid condition, the transaction will be compromised, and it will be binding on all involved parties to dissolve the transaction. If they do not, they will be sinful.

2. When the customer has not yet handed over the complete price of the purchased item, it is not permissible for the shop owner to purchase that same item back from the customer at a lower price. Therefore, in the scenario described in the question, as the shop owner has sold the mobile on instalments, and the total price has not yet been paid, he cannot purchase that mobile phone back from the customer at a lower price, even with a prompt cash payment. If some fault has developed in it, he may buy it back at a lower price.

The erudite Hanafi jurist, Muftī Amjad ꜤAlī al-AꜤẓamī رَحْمَةُ الـلّٰـهِ عَلَيْه states:

It is not permissible to purchase back, at a lower price, such an item which has been sold, but its price has not yet been received from the buyer, even if its rate has fallen at that time…It is impermissible to purchase in the situation where the price is from the same genus and no fault has developed in the item. If the price is from a different genus or a fault has developed in the item, then the transaction is permissible.[3]

وَاللہُ اَعْلَمُ عَزَّوَجَلَّ وَ رَسُوْلُہٗ اَعْلَم صلَّی اللہ علیہ واٰلہٖ وسلَّم

3. The ruling of reserving a plot or a flat when the land is not in the ownership of the builders?

Q: What do the scholars of Islam say about the following matter: Sometimes, when reserving a plot or a flat, the land is not in the ownership of the builders. Is it permissible to pursue such a reservation?

اَلْجَوَابُ بِعَوْنِ الْمَلِکِ الْوَھَّابِ اَللّٰھُمَّ ھِدَایَۃَ الْحَقِّ وَالصَّوَابِ

A: In this scenario, it is permitted to make a flat reservation because this is in the form of an order purchase. Therefore, there is no harm in it. However, if state laws stipulate that the builder cannot announce the project prior to owning the land, it will be necessary for the builder to abide by that.

This relates to a flat reservation as the action of production is found in this. For this reason, this consideration is applicable that the flat does not need to exist, rather it will be made upon order.

However, the purchase of a plot differs from this, as the ownership of the seller must be considered when purchasing it and the owner must specify its four boundaries. The sector, colony, phase, street number, plot number, etc., must all be specified on the blueprint. In fact, it must not be restricted to just the diagram, rather it must be so in reality, such that if you wish to stand on the plot and view what you are buying, you are able to do so.

However, if the plot is not in the builder’s ownership or one cannot determine which specific plot is being bought at the time of purchase, this is impermissible.

وَاللہُ اَعْلَمُ عَزَّوَجَلَّ وَ رَسُوْلُہٗ اَعْلَم صلَّی اللہ علیہ واٰلہٖ وسلَّم