Q 1. What is
the Islamic ruling on the purchase of residential houses, cars and others
home furnishings through Banks and Financial Institutions? The position
is that such institutions provide loan by putting these things under mortgage
and on this loan they charge interest at fixed rates. An alternate to
this situation is that such things be acquired on monthly rental basis.
But, this monthly rent generally exceeds the installments charged by Banks
as pointed out in the first case.
A. The transaction mentioned above, being based on interest, is
impermissible and unlawful. However, Muslims should make efforts to adopt
other permissible methods in accordance with the Shariah of Islam
as opposed to this interest-based transaction. For example, the Bank could
itself sell things pointed out in the question on installments. In other
words, the Bank should first buy things from the original seller, add
an appropriate profit, then sell it onwards to the customer, and then
realize its total price in installments.( Murabahah )
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