Q: I would like to obtain an opinion as to whether the business process described below is permissible in terms of Shariah Law:
We regularly purchase stock from a supplier and pay cash upfront for all our stock purchases. The supplier gives us an early settlement discount for paying for stock purchases in cash. We then pass on the bulk of the early settlement discount to our distributors for them to make a profit when they on sell the stock to their customers. Up until this stage, the business process is no different to established trade practices which are permissible in terms of Shariah Law. To confirm, the business process up until this stage consists of two transactions.
Transaction 1 - We pay a discounted purchase price for stock.
Transaction 2 – We on sell stock to our network of wholesalers and pass the bulk of our discount from the supplier on to the wholesaler.
The next stage of the business process entails an entirely separate and 3rd transaction.
Transaction 3 - The supplier, after having passed the early settlement discount to us, deposits the stock payment received from us into an interest earning bank account. The supplier uses the interest earnings to recover the early settlement discount given to us for a cash purchase.
We would like to emphasise that the supplier deposits the stock payment received from us into an interest earning bank account after we have received the early settlement discount and after we have received stock we have purchased. The sale of stock by the supplier to us is therefore complete by the time the supplier deposits our money into an interest bearing account. Our question is whether the third transaction in any way affects the validity of transactions 1 and 2 in terms of Shariah Law?
