The Ruling on Bay’ al-‘Inah and Its Prohibition

Authored by Dr. Muhammad Zia-ur-Rahman Azmi (رحمه الله)

Definition of Bay’ al-‘Inah:​

Bay’ al-‘Inah refers to a transaction where a person sells an item on credit for a higher price and then buys the same item back from the buyer at a lower cash price.

Example:

• A person sells a car for 50,000 (deferred payment over one year).
• Then, the same person buys back the car for 40,000 (cash).

This transaction is considered haram (prohibited) because it serves as a deceptive means to engage in riba (usury). Effectively, it resembles a loan where 40,000 is given in cash in exchange for 50,000 to be paid later, with the item (the car) being merely a cover for the interest-based transaction.

Scholarly Views on Bay’ al-‘Inah:​

1. Prohibition as a Deceptive Form of Riba:
   Abdullah ibn Abbas (رضي الله عنهما) remarked regarding such transactions:
   
   "This is merely exchanging dirhams for dirhams with silk cloth in between as a pretext."
   (Sunan Abi Dawood, Hadith No. 3462)
2. Condemnation in Hadith:
   The prohibition and condemnation of Bay’ al-‘Inah are established in the Prophetic traditions. This deceptive practice is considered a violation of Islamic principles of fairness and financial ethics.
3. Legal Maxim:
   Any contract or transaction that ultimately leads to riba, regardless of its apparent form, falls under the category of Bay’ al-‘Inah and is thus prohibited.

Conclusion:​

Bay’ al-‘Inah is prohibited in Islam as it constitutes a deceptive mechanism for engaging in usury. The pretext of selling and buying an item does not negate the reality that the transaction is effectively a loan with interest. Islamic financial principles emphasize transparency and fairness, rejecting any practices that exploit or circumvent the prohibition of riba.

—Referenced from Ibn Uthaymeen: Noor ‘Ala al-Darb, Vol. 1, Pg. 243.