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Fatwa CenterSelling deferred debt for a lesser amount is Riba (usury)
Question
There is a strange transaction that takes place here and that I have never seen the like of it in Islamic Fiqh (jurisprudence). Some sellers go to people at home, make customers and sell them things on installments. As a result, the seller may have ten thousand dollars as a debt that should be paid by his customers. After that, he might be obliged to travel and the repayment of his debt is not due yet, so he sells these debts to another man in return for 50 percent deduction of the debt. This is because the third party will have to spend money in order to collect this money. The first seller benefits by taking his money at once and the second seller benefits by knowing new customers without exerting any effort as this sometimes needs months or years. What is the ruling on such a transaction?
Answer
All perfect praise be to Allaah, the Lord of the worlds. I testify that there is none worthy of worship except Allaah, and that Muhammad, sallallaahu ‘alayhi wa sallam, is His Slave and Messenger.
The abovementioned transaction is based on prohibited Riba (usury) as it is a loan in return for a certain benefit.
For instance, the traveling seller might have ten thousand dollars and he takes from the buyer who will later collect the money from the clients only five thousand so this means that he gave ten thousand immediately for five thousand deferred and this is pure Riba.
This is the same as what is called "selling checks and bonds" and all these are prohibited Riba-based loans.
Allaah Knows best.
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