Question on the Fiqh of Financing
Question:
My husband and I are in the process of opening a small furniture store. We have worked hard and save some money to own a small business that is not based on riba. We are not taking any loans. We are trying very hard to not fall into anything that will constitute riba.
The industry is very competitive, for there are many big companies out there offering financing. Most of them offer 0% interest for up to 2 years. We would like to know if it would be permissible for us to let an independent financing company offer the financing for our clients. They are offering a one year 0% APR. We were thinking that we can mention to the customers that it would be in their advantage to pay off the loan within a year.
Please let us know if this would be permissible under sharia.
Answer:
If you are confident (by observation and past experience) that a particular client will pay the loan in time (within one year) and avoid being involved in Riba, then it would be permitted for you to have the independent financing company offer finance to that client.
However, if you think that the client will not be able to pay in time and will not be able to avoid Riba, it will not be permitted.
If you cannot determine whether the client is able to (and will) pay in time and avoid Riba or otherwise, it would be permitted to let the financing company offer him finance, although better to avoid.
The above ruling is based on the concept of being a cause for someone else’s sin. Imam Ibn Abidin (Allah have mercy on him) states:
“If one is the main cause for a sin (meaning if the cause would not have been present, there was no reason for one to sin), it will be Haram, otherwise it will be Makruh.” (Radd al-Muhtar)
And Allah knows best
[Mufti] Muhammad ibn Adam
Darul Iftaa
Leicester , UK