bay al-inah
How scholars criticize the practice of bay’ al-Inah in Malaysia Islamic Banking
Bay' al-Inah is a sale contract with immediate repurchase. It takes place when a person sells an asset in credit and immediately buys back the asset in cash at lower price. This practice has gained some popularity in the South East Asian region, despite the fact that it has been rejected outright in almost all other Muslim countries by the Islamic scholars. The classical jurists were in disagreement in assessing the legality of the contract. It was prohibited by majority of jurists including the Hanafis, Malikis and Hanbalis.
The Hanafis, Malikis and Hanbalis were of the opinion that the contract was unlawful. The legal evidence in this matter was an athar narrated from Aishah. The athar was used by the Hanafis, Malikis and Hanbalis as the main legal evidence to rule the impermissibility of bay' al-Inah. It was reported that Aishah was asked about a transaction conducted by the slave of Zaid bin Arqam. Acting on behalf of her master, the slave sold another slave of Zaid at 800 dirham in credit to Ata' and bought back the slave at 600 dirham in cash. Ruling the transaction, Aishah said, "it was very bad sale and inform Zaid that his conduct has eliminated all his rewards for participating in jihad with the Prophet if he does not repent''. According to the majority of jurists, Aishah assertion clearly indicated that bay' al-Inah was unlawful contract. Therefore, Ibn Qayyim prohibited Bai` al-`inah quoting the following Hadith that the Prophet Muhammad (pbuh) is reported to have said:
“A time is certainly coming to mankind when they would legalise riba under the name of bai’ (trade/sale).”
In contrast, al-Shafi'i did not consider the practice of bay' al-Inah as legal stratagem. He treated bay' al-Inah as two separate contracts in which each of them comply with all the essential elements of a sale contract. He established a principle that the validity of any type of sale
Bay' al-Inah is a sale contract with immediate repurchase. It takes place when a person sells an asset in credit and immediately buys back the asset in cash at lower price. This practice has gained some popularity in the South East Asian region, despite the fact that it has been rejected outright in almost all other Muslim countries by the Islamic scholars. The classical jurists were in disagreement in assessing the legality of the contract. It was prohibited by majority of jurists including the Hanafis, Malikis and Hanbalis.
The Hanafis, Malikis and Hanbalis were of the opinion that the contract was unlawful. The legal evidence in this matter was an athar narrated from Aishah. The athar was used by the Hanafis, Malikis and Hanbalis as the main legal evidence to rule the impermissibility of bay' al-Inah. It was reported that Aishah was asked about a transaction conducted by the slave of Zaid bin Arqam. Acting on behalf of her master, the slave sold another slave of Zaid at 800 dirham in credit to Ata' and bought back the slave at 600 dirham in cash. Ruling the transaction, Aishah said, "it was very bad sale and inform Zaid that his conduct has eliminated all his rewards for participating in jihad with the Prophet if he does not repent''. According to the majority of jurists, Aishah assertion clearly indicated that bay' al-Inah was unlawful contract. Therefore, Ibn Qayyim prohibited Bai` al-`inah quoting the following Hadith that the Prophet Muhammad (pbuh) is reported to have said:
“A time is certainly coming to mankind when they would legalise riba under the name of bai’ (trade/sale).”
In contrast, al-Shafi'i did not consider the practice of bay' al-Inah as legal stratagem. He treated bay' al-Inah as two separate contracts in which each of them comply with all the essential elements of a sale contract. He established a principle that the validity of any type of sale