Ruling on ‘hire-purchase’ sale
Fatwa No: 354679

Question

Assalaamu alaykum. I would like to know whether it is permissible to work for a company that sells electronic goods on hire-purchase (with a monthly payment), where the price is inclusive of an interest element charged from the customer (higher than the cash price). I will be responsible for setting the price, advertising, selling the product to consumers, and gaining a commision on numbers sold. Is this permissible given that there is interest involved?

Answer

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

There is absolutely no problem in the mere selling of goods by installments with an increase in the current price, and this is not Riba (interest).

The current sale [immediate exchange of cash for goods] is not like a deferred sale [buying now and paying later], and the scholars of Fiqh stated that it is permissible to sell with an increase in the price if it is paid at a later date than the current price.

Ibn Taymiyyah  may  Allaah  have  mercy  upon  him said, The delayed sale takes a portion from the price.

Now, we have to look at what you called ‘hire-purchase’; if you mean leasing that ends with ownership, then this comes in several forms, some of which are lawful, and some of which are forbidden.

The Islamic Fiqh Academy clarified this in detail, as it issued a decision in this regard, saying:

The terms and conditions for the lawful and forbidden forms:

1- Terms and conditions of prohibition: when there are two different contracts for one single commodity at the same time.

2- Terms and conditions of permissibility:

a) The existence of two separate contracts; each independent from the other in terms of time, such that the sale contract is concluded after the leasing contract, or the existence of a promise of ownership at the end of the leasing period. The choice is similar to the promise in rulings.

b) That the leasing is actual and not only covering (concealing) the sale.

3- It is the owner who guarantees the leased property, and not the lessee; thus the owner of the property guarantees the damage that is not resulted from the abuse or negligence of the lessee, and the lessee is not liable to anything if a benefit is missed.

4- If the contract includes insurance of the leased property, then the insurance must be an Islamic cooperative insurance and not a commercial insurance, and it is the lessor (the owner of the property) who takes the responsibility of this, and not the lessee.

5- The rulings of leasing must be applied to the rent-to-own contracts throughout the duration of the lease, and the ruling of the sale will be applied when owning the property.

6- The non-operational maintenance expenses should be assumed by the lessor, and not the lessee, throughout the duration of the lease.

Based on the above, if the company abides by the terms and conditions for the permissibility of hire-purchase that are mentioned above, then there is no harm on you to work in it or to guide people to it and to benefit from what you earn from it. But if this is not the case, then it is not permissible for you to work in it nor to guide people to it, and the compensation that you take from it is not permissible for you, as it is Islamically determined that it is forbidden to help in sin or disobedience.

Allah knows best.

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