If a person purchases goods on credit with the stipulation that payments will be in instalments, any fine due to delayed payment thereafter is clearly usury and interest. What can Muslim shop owners and businessmen do to be able to give goods on credit, ensure their payment is received on time and also abstain from usury? Please provide an answer.
In the Name of Allah, the Most Gracious, the Most Merciful.
As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.
It is permissible to purchase a commodity on cash or on credit on the stipulation that the deferred price is predetermined and agreed upon at the time of contracting the sale. However, according to Sharia, if the customer defaults in payment at the due date, the predetermined price cannot be increased and no further cost or fine can be imposed upon the defaulter.
Nevertheless, Muslim owners and businessmen may feel restricted since this can be potentially exploited by dishonest purchasers who intentionally fail to pay at its due date knowing that they will not be summoned to any additional amount on account of default. Therefore, the Islamic jurists have devised mechanisms to overcome this issue:
- The businessmen and shop-owners could develop a system where such defaulters are duly penalised by depriving them from enjoying any facility from that company in future. However, this will be most effective where the businesses and companies are working in collaboration with each other and thus the defaulters are deprived from enjoying any facility from all the corporates within the umbrella. Prophet Muhammad (peace be upon him) said:
المسلمون على شروطهم إلا شرطا أحل حراما أو حرّم حلالا
Translation: All the conditions agreed upon by the Muslims are upheld, except a condition which allows what is prohibited or prohibits what is lawful.
- The seller and purchaser may conclude a transaction whereby the price is agreed to be paid by a stipulated time; and if the purchaser defaults in payment within that certain period, the transaction would be void. This option in the terminology of Islamic jurists is called Khiyar an-Naqd (an option as to payment).
- Alternatively, the seller may further inflate the overall deferred price of the commodity at the time of transaction and then promise to provide a discount equivalent to the amount inflated on receiving regular payment on instalments.
For example: A wants to sell a commodity for a total of R3 000 under an instalment plan. A wants to ensure regular payment and thus inflates the price of the commodity and sells it to B for a deferred payment of additional R500 constituting R3 500 in total. A promises an incentive and discount of R500 only if B does not default in his regular payment. In this way, A will efficiently retrieve the R3 000 price for the commodity and B will ensure he does not default in regular payment in order to save R500.
It is important to note that, however, if the default is due to a genuine reason, such as poverty, it will be a gesture of goodwill from the businessman to give respite to the customer and lengthen the time by which the payment is due. Allah Ta`ala says:
وإن كان ذو عسرة فنظرة إلى ميسرة
Translation: And if he (the debtor) is short of funds, then he must be given respite until he is well off.
According to Hadhrat Mufti Muhammad Taqi Usmani (may his shadow remain upon us), the company may compel the customer, when entering into a transaction, to a self-undertaken vow and promise that in defaulting in payment at the due date, a specified amount would be paid as a deterrent, importantly not to serve the interests of the company but, to a specific charitable fund.
From a practical and theoretical point of view, point three seems to be more favourable; as in the case of a penalty, it does not solve the creditor’s problem. In the alternate situation, even if the debtor falters in the timeous payment, the creditor will be entitled to the excess R500 which may be more than the penalty amount and which does not compensate the creditor.
And Allah Ta’āla Knows Best
Hanif Yusuf Patel
Student Darul Iftaa
Checked and Approved by,
Mufti Ebrahim Desai.
 See: [An introduction to Islamic Finance, p.133-137, Maktaba Ma`arif al-Qur`an]
 Durar al-Hukkam fi Sharh Majallat al-Ahkam, Rule. 313
 [Al-Qur`an, 2: 280]
عن أبي هريرة قال قال رسول الله صلي الله عليه وسلم: من يسر على معسر يسر الله عليه في الدنيا والآخرة
[Ibn Majah, 2412]
قال رسول الله صلي الله عليه وسلم: من أحب أن يظله الله في ظله فلينظر معسرا أو ليضع له
 See: [An introduction to Islamic Finance, p.137-140, Maktaba Ma`arif al-Qur`an]