The ruling on selling Goods on Installment Payments for whoever does not really own the Goods

Question :

It has been noticed that a person may come to some companies while he has the need to buy some furniture or a car or a house or something else. The company does not have such items in its possession, so the company will buy this needed item and then sell it to this person on installments while taking some extra money for it. Or the company may hold the person responsible for buying the item and the company will pay the sum according to the bills, and in return they will take some extra money from this person. So, what is the ruling on that?

Answer:

It is known that whoever seeks a loan of 100,000 riyals in order to pay it back in installment payments with an increase of 8% for every payment and this percentage increases as time goes on, or even if it doesn't increase, this is Riba. It is Riba An-Nasi'ah and Riba Al-Fadhl. This deal increases in repulsiveness if the interest rate increases with time. This is from the Riba of the times of pre-Islamic ignorance, about which Allâh said:
"O you who believe! Eat not Riba doubled and multiplied, but fear Allâh so that you may be successful. And fear the Fire, which is prepared for the disbelievers. And obey Allâh and the Messenger (Muhammad) so that you may obtain mercy.

It is also known that conniving to carry out this transaction is conniving to do that which Allâh has forbidden, plotting and an attempt to deceive the One Who knows the most subtle of forms of deception and what the chests conceal.

It is also known that conniving to do those things that Allâh has forbidden does not change them to being lawful simply by the outward appearance of them as being lawful, while their goal is forbidden. It is known that conniving to do those things that Allâh has forbidden only increases those things in repulsiveness, because the one who does such scheming falls into two pitfalls. The first is deception, plotting and playing with the Laws of Allâh. The second is the corruption of that forbidden thing that he has found a tricky of way of getting, because such corruption is actualized by way of using this deceit.

It is also known that conniving to do those things that Allâh has forbidden is falling into what the Jews did, thus the person who enacts such a scheme is similar to the Jews in that. For this reason it has been mentioned in a Hadith:
"Do not commit the acts that the Jews did, by seeking to make lawful those things that Allâh had forbidden."

It is also known to whoever pays attention and avoids following the desires, that whoever says to a person who wants to buy a car:

"Go to the dealership and choose the car that you want and I will buy it from the dealership, and then sell it to you on installment payments."

Or he says to a person who wants to buy some land:

"Go to the real estate agent and choose the land that you want and I will buy it from the real estate agent. Then I will sell it to you on installment payments."

Or he says to a person who wants to build a building and he needs some metal:

"Go to such and such business and choose the metal that you like and I will buy it. Then I will sell it to you on installment payments."

I say that it is known to the person who pays attention, who is just and who does not merely follow desires, that dealing in this fashion is a form of conniving to indulge in Riba. This is because the businessman who purchased the item did not intend to buy it and that never crossed his mind, and he did not buy it for the sake of doing an act of goodness towards the person who wants it purely. He only bought it for the increase that he will get from it in return for the delayed (credit) payment. For this reason, as time goes on the increased amount grows. Thus, in reality, this is like the statement of the person who says, "I will loan you the price of these things with a Riba (interest) increase in return for the delayed payment," but he enters an item of purchase between them. This is like what is confirmed from Ibn 'Abbas that he was asked about a man who sold another man a piece of silk for 100 (to be paid later), then he bought it (back from him) for 50 (in cash). Ibn 'Abbas said, "This is selling dirhams for dirhams at an increased rate (which is Riba), and a piece of silk entered between them." Ibn Al-Qayyim said in Tahthibus-Sunan, 5/103, "And this Riba, its forbiddance follows it meaning and its reality. Thus, its forbiddance is not stopped by the changing of the name with the form of the sale."

If you took the issue of Al-'Eenah and put it with this issue, you would find that this issue is closer to a tricky method practicing Riba than the issue of Al-'Eenah in some of its forms. For verily Al-'Eenah is, as the Fiqh scholars have said, that a person sells an item to another person for a price to be paid later, and then he buys it from him in cash at a lower rate. It may be that the seller does not intend to buy the item back when he sells it, nevertheless, it still is forbidden for him to do this.

This transaction is not justified by the conniving seller's saying, "I am not forcing him to take the item that I bought for him".

This is because it is known that the buyer is not only seeking it because he has a need for it and that he will not change his mind about buying it. We have not heard that anyone of the people who buys these items in this fashion changes his mind about buying it, because the deceitful businessman has insured himself against that (in the deal) and he knows that the buyer will not back out of the deal. The only exception would be if he finds some defect in the product or deficiency in its features.

So if it is said, "If this transaction is a tricky way of practicing Riba, is there any way of benefitting from this transaction without it being a deceptive form of Riba?" The answer is that Allâh, with His Wisdom and Mercy, did not close the doors of benefits to the servants. For verily, if He made something forbidden to them due to its harm, he opened doors for them that contain benefits without harm. The way of safety from this transaction is that the products should be present with the business man, and he sells them to those who want to buy them on terms of delayed payment, even if there is an increase in the price. I do not think that any big businessman is unable to buy products that he thinks many people will desire, so that he can sell them to them at the price that he chooses. Thus, he gets what he wants of profit while being safe from tricky subterfuges of Riba, and he probably will gain reward in the Hereafter if he intends in that to make things easy on those who are unable to pay the up front price. Indeed the Prophet said:
"Actions are only with intentions, and each person will only get what he intended."

What the questioner mentioned in reference to the company burdening the buyer with buying the product that he wants, if the company wants him to be a representative of the company in that, then this is the issue that we have spoken about. If the company wants for him to buy the car himself, then this is a loan for gaining some benefit, and there is no doubt in the fact that it is clearly Riba.