Bai’ Al Dain
Here comes the question whether or not bai’-al-dain is allowed in Shariah. Dain means ‘debt’ and bai’ means sale. Bai’-al-dain, therefore, connotes the sale of debt. If a person has a debt receivable from a person and he wants to sell it at a discount, as normally happens in the bills of exchange, it is termed in Shariah as Bai’-al-dain. The traditional Muslim jurists (fuqaha) are unanimous on the point that bai’al-dain with discount is not allowed in Shariah. The overwhelming majority of the contemporary Muslim scholars are of the same view. However, some scholars of Malaysia have allowed this kind of sale. They normally refer to the ruling of Shâfi’ite school wherein it is held that the sale of debt is allowed, but they did not pay attention to the fact that the Shâfi’ite jurists have allowed it only in a case where a debt is sold at its par value.
In fact, the prohibition of bai’-al-dain is a logical consequence of the prohibition of ‘riba’ or interest. A ‘debt’ receivable in monetary terms corresponds to money, and every transaction where money is exchanged for the same denomination of money, the price must be at par value. Any increase or decrease from one side is tantamount to ‘riba’ and can never be allowed in Shariah.
Some scholars argue that the permissibility of bai’-al-dain is restricted to a case where the debt is created through the sale of a commodity. In this case, they say, the debt represents the sold commodity and its sale may be taken as the sale of a commodity. The argument, however, is devoid of force. For, once the commodity is sold, its ownership is passed on to the purchaser and it is no longer owned by the seller. What the seller owns is nothing other than money. Therefore if he sells the debt, it is no more than the sale of money and it cannot be termed by any stretch of imagination as the sale of the commodity.
That is why this view has not been accepted by the overwhelming majority of the contemporary scholars. The Islamic Fiqh Academy of Jeddah, which is the largest representative body of the Shariah scholars and has the representation of all the Muslim countries, including Malaysia, has approved the prohibition of bai’-al-dain unanimously without a single dissent.
Source: Republished with the kind permission of Sheikh Muhammad Taqi Usmani.
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