Fatwa: Re-evaluation of Commodity

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1. Fatwa Database https ://islamicmarkets.com/publications Topic: Re-evaluation of Commodity Please provide us with the Shariah opinion on the following: Question: The bank conducts Murabaha sale transactions. Some clients request the bank to buy goods from the local market. The bank would later on sell the goods to them at an agreed price in conformity with the market rate ensuring a reasonable profit for the bank. The client would repay the value to the bank by cheques on different terms extended over several months. In some cases the client demanded postponement of repayment to match the aforementioned cheques maturity due to conditions related to the commercial market which allows for previous selling prices to go higher, from the client's point of view. This encourages him to offer an increased sale value on the previously contracted goods provided that the bank extends settlement maturity dates designated in the cheques of goods price payment. The repayment schedule identified in the cheques, may, if the bank wishes, cause harm to the client and to his reputation from the legal point of view, particularly when the client is convinced that the future sale of this commodity is very promising signifying upward price trend. Accordingly, he opts to grant the bank, on his own volition, the advantage of increasing the previously agreed prices and that the mutual agreement on facilitating the client's proceedings is in line with the commercial system applied in the market. This is the intention of the bank's letter on which we require your opinion. Answer: The board has discussed the issue and would like to provide the following opinion: First: Murabaha sale transaction is not like what has been explained in the bank's letter i.e. sale on suitable price. Instead, on Murabaha, the seller would sell the commodity on the actual price and cost, added to it whatever profit has been agreed with the buyer which is accepted by both parties. Thus, if the Murabaha sale has been conducted on this ground, the bank would not be entitled to re-evaluate the sold commodity price. Second: due to buyer delay to paying the price at the designated time because this method indicates that delay in settlement of debt was made in consideration of an interest which is prohibited (Haram). Compiled & Classified By: Dr Ahmed Mohieddin Ahmed Source: Reviewed by: Dr Abdul Sattar Abu Ghuddah Book of Fatwas of Shariah Board of Faisal Islamic Bank of Egypt, Fatwa No. (14).