Is factoring and Invoice Discounting allowed in Islam if no then what is the solution and if yes then can you please recommend institutions which are doing it the proper way.
Answer:
In the Name of Allah, the Most Gracious, the Most Merciful.
As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.
Factoring is a financial transaction whereby a business sells its accounts receivable (i.e. invoices) for cash to a third party (called a factor) at a discount.1
Invoice discounting is also a form of factoring.2
Factoring and invoice discounting both are not permissible.3
You may be present your personal situation to the Darul Iftaa. We will advise on the alternative.
And Allah Ta’āla Knows Best
Huzaifah Deedat
Student Darul Iftaa
Lusaka, Zambia
Checked and Approved by,
Mufti Ebrahim Desai.
www.daruliftaa.net
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1chttps://en.wikipedia.org/wiki/Invoice_discounting
2 https://en.wikipedia.org/wiki/Factoring_(finance)
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