Finance Structure for a transaction
| Fatwa #1458 | Category: Business & Trade | Country: | Date: 25th April 2025 |
| Fatwa #1458 | Date: 25th April 2025 |
| Category: Business & Trade | |
| Country: | |
Question
Salaams
Question for guidance
Suppose Ahmed wants to start a manufacturing business and needs financing from person named Bilal for the raw materials purchase for his manufacturing operation.
Bilal is willing to provide initial raw materials capital worth 50,000 kwacha to Ahmed… at a cost plus profit basis and re payment terms of 3 years….
So basically 50,000 kwacha of raw materials plus 20
percent profit = k 60,000 to be repaid over 3 years time fully….
Note , it’s for raw material purchases which keep on getting used up and not fixed assets…
Is this transaction allowed?
Answer
In the Name of Allah, the Most Gracious, the Most Merciful.
As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.
The finance agreement shall be on a Murabaha basis wherein:[1]
- Bilal shall purchase the raw materials for k50,000 and once received, shall sell them to Ahmed for k60,000, payable over three years.
- Bilal may also appoint Ahmed as his agent to purchase the raw materials on his behalf. Once the materials are received, Bilal shall then sell them to Ahmed.
- Bilal must take possession of the raw materials, physically or constructively, before he can sell them to Ahmed.
- Constructive possession means that Bilal ‘has access’ to the items, though he has not physically seen or touched them.
- The ‘risk’ of the raw materials shall only transfer from Bilal to Ahmed once Bilal sells the raw materials to Ahmed. Prior to that, they will remain in the risk of Bilal.
For more details or assistance in drafting the contracts, contact the Darul Iftaa office.
And Allah Ta’āla Knows Best
Mufti Bilal Pandor
Concurred by
Mufti Muhammad Patel
Darul Iftaa Mahmudiyyah
Lusaka, Zambia
[1] Introduction to Islamic Finance Mufti Taqi Uthmani pg95