Rescheduling of Payments

If the purchaser/client in murabahah financing is not able to pay according to the dates agreed upon in the murabahah agreement, he sometimes requests the seller / the bank for rescheduling the instalments. In conventional banks, the loans are normally rescheduled on the basis of additional interest. This is not possible in murabahah payments. If the instalments are rescheduled, no additional amount can be charged for rescheduling. The amount of the murabahah price will remain the same in the same currency.

Some Islamic banks proposed to reschedule the murabahah price in a hard currency different from the one in which the original sale took place. This was proposed to compensate the bank through appreciation of the value of the hard currency. Since this benefit was proposed to be drawn from rescheduling, it is not permissible. Rescheduling must always be on the basis of the same amount in the same currency. At the time of payment however, the purchaser may pay with the consent of the seller, in a different currency on the basis of the exchange rate of that day (i.e. the day of payment) and not the rate of the date of transaction.

Source: Republished with the kind permission of Sheikh Muhammad Taqi Usmani.