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Islamic Finance

  Islamic Finance   |   Terms
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  • August 22, 2021
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Ba’i al-‘Inah

Arabic (بيع العينة) for a round-tripping sale (or double sale) in which one party (actually the lender) sells another (actually the borrower) an object (commodity, asset, etc) fro a given price on credit (deferred price) and simultaneously repurchases it for a lower price. The net result of this fictitious transaction is an interest-bearing (riba-based) loan- impermissible under shari’a law. The underlying object in this case is just used fictitiously to gloss over the intentions of the parties (i.e., the seller actually seeks to provide financing against interest, whilst the buyer looks for credit). The difference between the deferred price and the cash price constitutes the interest amount.


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