Riba Only On Consumable Items
Please don’t hesitate to continue asking – there are no hard feelings at all. The purpose of this app is precisely to help people understand things. The reason that I shared a reference to your previous question was because while this question is different, the principle remains the same. Things don’t become haram according to our own wishes; we can only make things haram on the authority of God and His prophet SAW. If I understand it correctly, what you are saying is that if an additional amount earned when lending money is considered riba, then how come it’s not considered riba when selling things on installments. I will attempt to explain, and the idea is actually very simple. I am sure that you will agree that rent transactions are perfectly halal. I even shared a hadith reference with you above. When we analyze rent, it is nothing more than usage fee for a usable item for a predetermined time period. Now consider that instead of renting the same usable item, we buy it on installments. For simplicity sake, let’s consider that the cash price for that item was $1200, but the seller agreed to sell it to us for 12 monthly installments of $100. I am sure you will agree that this is also a perfectly halal transaction. The problem with this transaction, however, is that it is unjust to the seller . He has $1200 tied up for an entire year, while he could have sold the same item to someone else for the upfront cash price. Additionally, by selling on installments he is assuming a risk – we might default on the transaction and he might lose some or most of his money. Now consider a transaction that’s hybrid of the above two perfectly halal transactions. In this transaction, the seller agrees to sell us the same usable item on installments, but stipulates that until the item has been paid in full, he will charge us a monthly usage fee (rent) for the portion of the item that is unpaid for. The only confusion here is that they generally call this usage fee interest, while we have been told that interest is haram. Otherwise, a hybrid of two perfectly halal transactions can only be halal – there’s no real basis to term this transaction as haram . In fact, this transaction would be the most fair because not only that it will allow a buyer to benefit who can’t afford to buy the item for the upfront cash price, but it won’t be unjust to the seller either. I hope that this helps.