A legitimate form of trade

10-3-2016 | IslamWeb

Question:

Nasir runs a financial company and gives money to people for their business from the company in the following form: A man has a shop of cloth in the market, the forementioned company sends its field officer to the shopkeeper and asks him from where he purchased the cloth? For example, he replies that he purchases it from DD cloth merchant. Then the field officer says to him, "Now our company will buy from that DD merchant shop whatever you need, the bill and invioce will also be prepared in the name of our company, and our company wiil pay the amount to the DD merchant. Our company will sell you these clothes with a profit of 15% and you have to pay the total amount (base price + 15% profit) in 10 installments, for example. If you delay any installments, then there is no fine . You can pay both installments next month." You are humbly requested to answer this question in light of the Holy Quran and the Hadith. Is this permissible or not? May Allaah reward you!
Answer:

All perfect praise be to Allaah, The Lord of the Worlds. I testify that there is none worthy of worship except Allaah and that Muhammad sallallaahu `alayhi wa sallam ( may Allaah exalt his mention ) is His slave and Messenger.

If the company buys the clothes and possesses them as per Islamic law [i.e. it really becomes the owner of these clothes] and then it sells them to the merchant with specific installments while it does not set any prohibited conditions, such as imposing a fine for the delay, or asking for commercial insurance, or other forbidden conditions, then there is nothing wrong in doing so, as this is a kind of sale that Allaah has permitted with its conditions; Allaah says (what means): {But Allaah has permitted trade and has forbidden interest.} [Quran 2:275] {C}

Also, there is nothing wrong with the company taking a profit of 15% from the merchant or any other percentage that is agreed upon (between the two parties) and is specified at the time of the contract; the profit is the main purpose of trade, and this is something permitted without any specific limit (for the profit).

'Urwah ibn Ja’d may Allaah be pleased with him said:

“A jalab (merchandise) came to the Prophet sallallaahu `alayhi wa sallam ( may Allaah exalt his mention ) (in Madeenah); so he gave me one dinar and said to me, 'O 'Urwah, go to that jalab and buy a sheep for us.' Thereupon, I went to the jalab and bargained and bought two sheep with one dinar. On my way back, I met a man who wanted to buy a sheep from me. So I sold one sheep for one dinar, and brought one dinar and a sheep to the Prophet sallallaahu `alayhi wa sallam ( may Allaah exalt his mention ). I said, 'O Prophet of Allaah, this is your money and this is your sheep...' Thereupon, the Prophet sallallaahu `alayhi wa sallam ( may Allaah exalt his mention ) invoked Allaah, saying, 'O Allaah bless him in his deals.'” [Al-Bukhari]

Besides, Al-Bukhari may Allaah have mercy upon him reported that Az-Zubayr may Allaah be pleased with him had bought Al-Ghaabah land for one hundred and seventy thousand. His son 'Abdullaah sold it for one million and six hundred thousand. This means that he sold it at a price that is nine times more than its original price.

Allaah knows best.

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