Bai’ul Inah – Is it really Permissible?
Nowadays, we are bombarded by advertisements/flyers/pamphlets from banks, financial institutions even Ahlong (loan shark) about their Islamic Financing or Products especially BAI’UL INAH. First of all, we need to understand what is Bai’ul Inah and why it is favorable by the banks and even ALONG (loan shark).
Bai’ul Inah is a selling and buying contract that practices by the banks/financial institutions/Ahlong to BYPASS the prohibition ofriba’/interest/usury/faedah (malay) by Islamic Laws or Syari’ah Laws. The selling and buying transaction are only an excuse to give out and receive loan in cash. The four Schools of Fiqh (Maliki, Hanbali, Hanafi and Shafie) prohibit this practice of Bai’ul Inah since the initial intention of the contract is to give out and receive loan, not selling and buying.
However, there is a certain Ulama’ from Shafie School is allowing this practice but under a strict conditions. Currently, Malaysia is the ONLY Muslim country that is allowing the concept of Bai’ul Inah.
Ibnu Qayyim (691H/1292M – 751H/1350M) was a respected Fiqh scholar during his time. Among his contributions are in the Islamic Economic System. He quoted that the Prophet said “the days will come where people will practices riba in the form of selling and buying transactions”.
From the above Hadith by the Prophet, it is obviously that Bai’ul Inah is not allowed and disliked by the Prophet since it was one form of riba practices. Even One of the cause of the fall of Islamic Empire was the practice of riba’ in the form of selling and buying and also ignoring the welfare of the needy. In this case, the practice of Bai'ul Inah was practiced freely as a medium to give out and receive loan and charging interest
Following is an illustration of a Bai’ul Inah transactions:
For example, Al-ABC Bank is a bank and Ahmad is a customer who is seeking for a financial assistance from a bank for his business. Ahmad came to Al-ABC Bank and applying for a loan through the Bai’ul Inah concept that offered by Al-ABC Bank.
Al-ABC Bank then will sell an asset to Ahmad (e.g: Bank’s Photostate Machine) on deferred payment basis at RM10,000. Thereafter, Al‐Amin Bank will immediately buy back the photostate machine from Ahmad for cash (spot payment) at RM6,000 (price that is lower than the initial selling price).
And in the end, Ahmad will received RM6,00 and indebted Al-ABC Bank for Rm10,000 with an extra amount of RM4,000.
Definition of “Inah”?
Inah is derived from the word “ain” means goods or items since the buyer or the customer who is involved in this contract is in need to get the goods which is in this context, the “MONEY” or in more simple and descriptive words that usually used in the advertisments by banks or financial institutions “fast cash” or “express cash” only with a dash “i” ( -i ) to differentiate from the convetional financing options.
There are 2 (two) types of Bai’ul Inah:
1. The CUSTOMERS are REQUIRED to immediately sell the items or goods to the BUYER with CONDITION that the customer will sell it at a lower price from the first sale.
2. The CUSTOMERS are given the options to keep the items and after the buyer have the ownership; the customers have the OPTIONS to sell it back to the BUYER at a lower price from the first sale.
The Fiqh Scholars are collectively agreed on the prohibition of the first type of Bai’ul Inah since it has a CONDITION that required the customers to immediately re-sell the goods to the buyer at a lower price in exchange for cash.
However, there are conflicts in opinion of the scholars regarding the second option of Bai’ul Inah since it may lead to the practice of riba’. The prophet S.A.W said that “Anyone who hover around the Hima-foyer (where prohibited) to fear of falling into it” – Al-Bukhari.
Only a certain ulama’ from Syafi’e School are allowing the second type of Bai’ul Inah.
Issues Regarding The Practice of Bai’ul Inah.
In Malaysia, the Islamic Banking System is believed to apply the first type of Bai’ul Inah. Some of the banks are using the bank’s assets such as computer, Photostat machine and even the ATM Machine that have no use to customers. The practice of the first type of Bai’ul Inah is obviously prohibited but the Malaysian is still practicing it.
Among of the issues that have been raised in Bai’ul Inah practices in Malaysia are:
1. Perform Bai’ul Inah and imposes conditions in the contract where the customers are required to re-sell the assets to bank at a lower price.
2. Applying the Syafi’e School opinion on the first type of Bai’ul Inah, however the Syafi’e Scool is only allowing the second type of Bai’ul Inah where there are no condition for the customer to re-sell the assets
3. No actual selling and buying transactions (bai’) and the assets are never leave the bank. The selling and buying are only an excuse to give out loan with interest
Wallhua’lam, Comments/Suggestions/Improvisations are welcome.
