Understanding Islamic Finance - Doha Academy of Tertiary Studies

220 Understanding Islamic Financeright of the seller. It is, therefore, within his discretion to postpone it for the convenienceand ease of the purchaser. The fact is that he is empowered even to forego it altogether. 28Delay in payment under Murabaha is also allowed in other schools of Fiqh, includingShiaites. 29As described in detail in Chapter 6, jurists slightly differ on the aspect of different cashand credit prices. The Hanafis, Shafi‘es and Hanbalis permit the difference between cashand credit prices provided one price is settled at the finalization of the contract. AlthoughImam Malik himself forbade it, some of the Malikis hold a different view and allow it.Contemporary jurists are almost unanimous on the legality of this difference. The rationalebehind this viewpoint is that exchange in respect of a loan wherein any excess is prohibitedoccurs between a commodity and its like, while in credit sale, one of the counter values isthe money and the other any goods of trade. As, for example, in loan transactions, $100 canonly be exchanged for $100 or a ton of wheat for a ton of wheat. Any increase in the mutualexchange, therefore, is Riba. In the case of credit sale, exchange has to take place betweentwo different commodities. First, money is exchanged for goods and then goods are soldagainst money. Therefore, the difference between the purchase price and sale price does notamount to Riba. 30Further, interest charged on a loan is payable to the lender in any case. In a sale contract,this is not so because the prices are liable to change. If the price rises, the purchaser gainsbecause he purchased a good on a deferred payment basis at a cheaper price, but if the pricedrops, the seller gains because he succeeded in selling the item purchased on a deferredpayment basis at a higher price. Bai‘ bi Thaman al-’Ajil or Bai‘ Mu‘ajjal is, therefore, inconformity with the Fiqhi principle “Al-Ghunm bil Ghurm”, i.e. profit goes with loss. 31However, the sale contract has to be finalized at one price so that the exact liability is knownto the parties. This would practically imply that the whole price is in return of the saleitem. 32However, it is not allowed to conduct Murabaha on a deferred payment basis in the case ofgold, silver or currencies, because all monetary units are subject to the rules of Bai‘ al Sarf.Similarly, receivables or debt instruments cannot become the subject matter of Murabaha,as any profit over the principal of a debt is Riba. 33 However, Murabaha of shares of jointstock companies eligible on the basis of screening criteria is allowed.9.7 POSSIBLE STRUCTURES OF MURABAHATrading and other real sector business activities require specific expertise, which bankers mayor may not have. Further, it is not possible for banks to train all staff in trading, marketingand other real sector activities required for Islamic banking practices. One possible solutionis that banks may establish specific purpose companies to undertake trading (and leasing)activities and the staff with relevant specialized expertise may be entrusted the job of tradingin goods so as to fulfil the Sharī´ah essentials of Murabaha–Mu’ajjal. Those companies28 Al-Marghinani, 1957, p. 288.29 Al-Hilli, 1389 AH, p. 41.30 Nooruddin, 1977, p. 125.31 Nooruddin, 1977, p. 126.32 Nooruddin, 1977, p. 134; Al-Sanani, 1972, pp. 136–137.33 AAOIFI, 2004–5a, Murabaha Standard, clause 2/2/6; pp. 114, 128.