Business and Dealings

Q: Someone owns a shop. Because people often ask for discounts, they mark the items higher, so when people ask for discounts, they give it and still get their desired profit. 

Eg. He wants a profit of R50 for a R100 item. However, knowing that people will ask for a discount, he marks the item as R200. So when people ask for a R50 discount, he gives it to them and still gets his desired profit. Is this permissible in Shari'ah or is that money haraam?

Q: I am starting a business providing tuition to students. Can I charge them per month to be paid at the beginning of the month at a fixed fee, say R100 per lesson for 8 lessons, so R800 for the month. My concern is that they might not attend all the lessons but they have already paid, is this permissible?

Q: Is it permissible for one to purchase a vehicle or property through the bank? At times, the bank instalments are fixed, and at times, it fluctuates. What is the Shar’ee ruling in both situations?

Q: A certain person has a PDC (post-dated cheque) but needs the cash urgently. He approaches someone to give him cash in lieu of the cheque which the person will cash later on and receive the money. The person agrees to give him the cash in lieu of the cheque, but is only willing to pay him an amount that is less than the value of the cheque. For example, the cheque is for R25 000 and the person agrees to pay him R24 000 cash. Is it permissible for him to accept the R24 000 in lieu of his R25 000 cheque?

Q: I dealt with one of the Islamic banks in purchasing a car. I purchased the car from the dealer and even paid a certain amount of the car upfront to him. Thereafter, I referred to an Islamic bank and asked them to assist me purchase the car. I even informed them that I already paid a certain amount for the car. The bank accepted to assist me and made me sign the form of acting as their agent of purchasing the car from the dealer. After the necessary paperwork was completed, the bank paid the dealer the remainder amount that I was owing and made me sign an agreement with them to buy the car from them. In exchange of the money they paid to the dealer, they sold the car to me with a profit. Is this contract which I entered into with the Islamic bank Shari’ah compliant?

Q: Is a decreasing partnership arrangement correct? This arrangement is used by some Islamic banks who call it diminishing mushaarakah.

An example of a diminishing mushaarakah is where the client wants to purchase a property, but does not have the full amount required. Instead, he only has 50% of the funds. Hence, he approaches the Islamic bank who purchases the property with him in partnership. Accordingly, they each contribute 50% of the funds and own 50% of the property. The client will then pay the bank rental for the 50% of the bank that he is occupying.

When entering into the partnership with the bank, the client is made to sign a promissory agreement, which is legally binding, in which he unilaterally undertakes to purchase a stipulated portion of the bank’s share at fixed intervals. For example, he will purchase 10% of the bank’s share every year. In this manner, the bank’s share will continue to diminish over 5 years, until it has sold its entire share to the client. However, since the agreement is legally binding, the client does not have the option of refusing to purchase the bank’s share when the stipulated intervals arrive.

Since the bank’s share diminishes over time, the rental which the client pays to the bank also decreases proportionately. Nevertheless, when drawing up the contract, the bank often uses the interest rate to determine the profit that they will make from the partnership.

Is this type of diminishing mushaarakah permissible?

Q: What is the difference between a service plan and medical aid, insurance or hospital plans? All seem to render a service to the person in case of need.

Q: Is it permissible to sell the fruit of a tree before the season of its growth (i.e. before it appears on the tree)?

Q: Is it permissible to buy an unborn calf or goat in advance? In other words, a person says to the farmer, “I am purchasing the next calf that is born from your flock.”

Q: A person runs a business and sells goods to people on account. What provision does Islam have for this person’s security in terms of him getting his money on time as it is not permissible to charge a penalty upon late payment? Sometimes, the account can be so huge per month that it can bring his entire business to a standstill.