Posted by: theMajlis

MURAABAHAH AND THE MUSLIM BANKS

Muraabahah is a straightforward sale agreement unencumbered with the many capitalist provisions which the Muslim banks have acquired from their kuffaar counterparts. In a Muraabahah sale, the seller adds a known fixed amount of profit to his cost price. He makes the amount of profit he is charging known to the buyer. The cost plus the known profit amount is the price for which he sells the article. This is the lawful Muraabahah transaction in the Shariah. All other additions to it are baatil (null and void) and not permissible.

Instead of maintaining the transaction in the pure unadulterated form the Shariah has given it, the Muslim bank gives a loan, charges interest o­n the loan and passes it off as a muraabahah deal. The factors which render the deal unlawful in the Shariah are as follows:

(1) The initial payment of R75,000 (in the example given by the Al-Barakah Bank) is made directly to the supplier of the vehicle. The customer does not purchase the vehicle from the Bank. He himself arranges the deal with the supplier and he pays the supplier a deposit of R75,000. The supplier invoices the outstanding balance to the Bank which pays him. So while the Bank’s agreement records the ‘profit’ of R15,000 o­n the selling price of the vehicle, it is in actual fact an interest-charge o­n the outstanding balance which the Bank pays to the supplier.

The buyer then pays the outstanding balance plus the R15,000 interest over 36 months. This condition by itself renders the deal haraam. It is a plain and simple riba deal.

(2) The sale agreement is entered into at a time when the Bank does not own the vehicle. The vehicle has not yet been acquired by the Bank. It sells a non-existing vehicle, i.e. a vehicle which it does not own. This is Bay’ul Mafqood (Sale of something which does not exist by the seller). Such a deal is baatil. It is imperative for the Bank to first buy the vehicle then o­nly will the sale be valid.

(3) The stamp duties and administration charges for preparing the agreement and the haraam insurance documents are haraam charges. The first of the two should be added into the cost structure and not listed as an additional amount to be paid by the customer. The second charge is haraam in all cases and may not be charged.

(4) The Agreement appoints the buyer of the vehicle as the Bank’s agent to purchase the vehicle and in the same breath appoints him as the Bank’s agent to sell the vehicle to himself. The appointment to purchase the vehicle is valid. But the directive to sell a nonexisting vehicle to himself is baseless. The bank can rectify this incongruency by simply sending a man to purchase the vehicle. The customer can accompany the bank’s man to the supplier. After the purchase has been concluded, he can assign the vehicle to the customer, i.e. the Bank’s customer. In this case he will not be the supplier’s customer.

Although the Agreement states that the Bank is the Seller, in reality it is not. The seller is the supplier of the vehicle to whom the initial deposit was made. If he is not the true seller, then why did the customer pay him R75,000? And, why does he invoice the Bank for o­nly the outstanding balance. No matter how the Bank desires to save its skin by the incongruent application of Shar’i technicalities, it cannot escape the fact that it is merely giving a loan and charging a large sum as interest.

(5) The Agreement claims that the supplier is the agent of the Bank in selling the vehicle, But reality belies this contention. The supplier sells his own property. How can he be the Bank’s agent when he is selling an item which is his own property? The Bank has not yet procured the vehicle. It is plain and simple to understand who the true seller of the vehicle is. If the Bank wishes to be known as the seller, it should send its man to the supplier and purchase the vehicle outrightly. By saying that the supplier is the Bank’s agent, he does not become the agent.

(6) The Agreement stipulates that "the Purchaser shall at his own cost procure and take delivery of the goods from the Seller". This additional cost is negatory of the Muraabahah transaction. This cost has to be borne by the seller and included into his cost structure. He is allowed to reflect his total cost price which he will add to his desired profit made known to the buyer.

(7) The Bank stipulates a he inous and an oppressive clause in its so-called muraabahah agreement. It says: "If the Seller cancels the Agreement or enforces the Agreement and the Purchaser disputes such cancellation or enforcement, the Purchaser shall continue to pay to the Seller all amounts due in terms of this Agreement o­n the due dates of payment….."

If the deal is cancelled, the purchaser is under no Shar’i obligation to pay the instalments. This is a clear zulm stipulation which allows the seller to usurp the money of the purchaser.

(8) The Bank brazenly stipulates in its agreement payment of riba o­n late payments made by the purchaser. Actually he is not a purchaser in relation to the bank. He is a debtor to whom the bank has made a loan. The camouflaging tactic of describing the interest charge as a ‘penalty’ does not alter the riba status of the charge. We have written a booklet in refutation of this haraam riba charge. Copies of this booklet, PENALTY OF DEFAULT [http://books.themajlis.net/node/view/67], are available from the Y.M.M.A., P.O.Box 18594, Actonville 1506 South Africa. The Bank has in vain endeavoured to make halaal this haraam riba by presenting altruistic motives. Such altruism even if sincere does not legalize what Allah Ta’ala has made haraam. Charity does not legalize riba.

(9) The additional two charges of R25 and R50 apart from the interest charge mentioned in No.8 above, are also haraam riba which the so-called Muslim bank levies o­n late payments.

(10) The Bank in its Muraabahah Agreement stipulates insurance. The purchaser is obliged to "immedialetely and at its expense fully insure and keep insured the Goods against all risk of loss, damage or destruction….." This flagrant violation of the Shariah effectively renders the agreement haraam.

In view of all these violations, the deal is not a valid Muraabahah transaction. It is not permissible to enter into this riba transaction.

The Majlis Vol 15 No 11