Some islamic banks or financial institutions have

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Some Islamic banks or financial institutions have misunderstood the concept of murabahah as merely a mode of financing analogous to an interest-based loan, and started applying the concept of roll-over to murabahah . If the client requests them to extend the maturity date
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Fiqh Al-Mua’malat © INTERNATIONAL CENTRE FOR EDUCATION IN ISLAMIC FINANCE 2013/1434 AH ® Unit 1 | 16 Application of Murabahah of murabahah , they roll it over and extend the period of payment on an additional mark-up charged to the client which practically means that another separate murabahah is booked on the same commodity. This practice is totally against the principles of Shari’ah . It should be clearly understood that murabahah is not a loan. It is the sale of a commodity where the price is deferred to a specific date. Once the commodity is sold, its ownership is passed on to the client. It is no more a property of the seller. What the seller can legitimately claim is the agreed price, which has become a debt payable by the buyer. Therefore, there is no question of effecting another sale on the same commodity between the same parties. The rollover in murabahah is nothing but interest because it is an agreement to charge an additional amount on the debt created by the murabahah sale. G. Rebate on Early Payment Sometimes the debtor wants to pay earlier than the specified date. In this case he wants to earn a discount on the agreed deferred price. Is it permissible to allow him a rebate for his early payment? This question has been discussed by the classical jurists in detail. The issue is known in Islamic legal literature as “da’ wa taajjal” (Give discount and receive soon). Some earlier jurists have held this arrangement as permissible, but the majority of the Muslim jurists; including the four recognized schools of Islamic jurisprudence do not allow it, if the discount is held to be a condition for earlier payment. The view of those who allow this arrangement is based on a hadith in which Abdullah ibn Masud is reported to have said that when the Jews belonging to the tribe of Banu Nadir were banished from Madinah (because of their conspiracies) some people came to the Prophet s.a.w. and said, “You have ordered them to be expelled, but some people owe them some debts which have not yet matured.” Thereupon the Prophet s.a.w. said to them (that is, the Jews who were the creditors) “Give discount and receive (your debts) soon”. The majority of the Muslim jurists, however, do not accept this hadith as authentic. Even if the hadith is held to be authentic, the exile of Banu Nadir was in the second year after hijrah , when riba was not prohibited yet. For these reasons, the majority of the jurists hold that if the earlier payment is conditioned with discount, it is not permissible. However, if this is not taken to be a condition for earlier payment, and the creditor gives a rebate voluntarily, it is permissible.
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  • Spring '17
  • Assoc. Prof. Dr. Aishath Muneeza

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