Charging a penalty for late payment

Q: Is it permissible to sell an item on terms to pay and in the receipt/agreement it is made clear that if payment is not made by a stipulated date, the person will be charged a set amount for each month in the delay of payment. Both parties sign the agreement and everything is transparent. Or is the amount to be charged to the customer for delay in payment considered riba?

A: This is pure interest.

And Allah Ta'ala (الله تعالى) knows best.


Answered by:

Mufti Ebrahim Salejee (Isipingo Beach)