Dar Al-Ifta Clarifies the Ruling on Installment Sales with Price Increases: Is It Usury or Legitimate Trade?
Learn the ruling on installment sales with a higher price according to Egypt’s Dar Al-Ifta, the difference between such sales and usury, and the Islamic guidelines that make installment-based transactions permissible.
With the spread of modern financial transactions, an important question frequently arises about the ruling on installment sales with a higher price, and whether this falls under riba (usury) or is a permissible form of trade in Islamic law.
Ruling on Installment Sales in Islamic Law
The Egyptian Dar al-Ifta clarified that installment sales with a known increase over the original price are permissible, provided that the total price is clearly agreed upon at the time of contract and the payment schedule is known to both parties.
Difference Between Installment Sales and Riba
1- Nature of the Contract
Installment sales involve selling a real product for a deferred, agreed-upon price, while riba involves an increase on a loan without any underlying asset or exchange of goods.
2- Presence of Goods
In installment sales, there is a tangible product being exchanged, which places the transaction under lawful trade rather than interest-based lending.
3- Price Definition
The final price must be clearly defined from the beginning of the contract without ambiguity or undisclosed increases.
Ruling on Price Increase
The increase in price in installment sales is part of the agreed-upon sale price for the commodity and not interest on a loan, making it permissible under Islamic law when structured properly.
Conclusion
Installment sales are permissible when their conditions are met and are fundamentally different from riba, as they are based on the sale of a real asset rather than an interest-bearing loan.
Frequently Asked Questions
Is installment buying prohibited in Islam?
No, it is permissible if the price and payment terms are clearly defined from the start.
What is the difference between installment sales and riba?
Installment sales involve trading goods, while riba involves an increase on a loan without a trade.
Is it allowed to increase the price in installments?
Yes, as long as the increase is agreed upon and clearly stated in the contract.
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