Is Invoice Discounting Acceptable?
The question, as received
Earlier in the below link you had mentioned that Invoice discounting is un lawful https://darulfiqh.com/is-invoice-discounting-permissible/
but I had gone through lot of articles and videos where there is no mention of Interest anywhere and the process is straight forward. Moreover there are platforms available now where you direct buy invoice instead of depositing money into some financial institution and they buy for you. I feel this process is like I am getting product on discounted price and I am reselling it on actual price after sometime.
You buy invoice on discount and get resell it for actual price. You benefit from discount. Let me know where is Riba involved here. I don’t see bank involvement here except for transactions. Please clarify [Question published as received]
The answer
Conventional invoice discounting is not Shariah compliant. It involves the sale of debt with discount, which is a form of Ribā also. Even if interest is not mentioned in the charges, Ribā is still involved as the sale of debt with discount is prohibited.
Fiqh basis
Debt reselling refers to the act of collecting and reselling of due debts. It is a sale of payable right or receivable debt, either to the debtor themselves or a third-party financier. The purchaser would buy the debt from the creditor for an immediate price – usually a lower value or a percentage of the face value of the debt then collect the whole debt from the debtor thereby making profit.
Reselling due debts, or invoices in this particular scenario, is referred to in Shari’ah as Ba’i Ad Dayn.In such a financial arrangement, the financier would assume the debt from the creditor for an immediate discountedprice and thereafter collect the entire credited total from the debtor, thereby making a profit. This profit is Ribā.
This is identical to a usurious transaction and is deemed impermissible. Any transaction involving the sale of money is required to be conducted at face value and without any inflation or reduction, for the transaction to be in conformity with Islamic principles.
And Allah knows best.
Maulana Ammar Y Badat
Reviewed and approved by Mufti Faraz Adam
References
وَالْخَامِس وَالْعشْرُونَ عَن بيع الدّين بِالدّينِ وَهُوَ ان يكون لرجل دين من ثمن مَتَاع بَاعه مِنْهُ اَوْ قرض من حِنْطَة اَوْ شعير اَوْ شَيْء من الْوَزْن فيبيعه من رجل اخر اَوْ من ذَلِك الرجل نسيئا فَأن ذَلِك لَا يجوز ـ(ص475 – كتاب النتف في الفتاوى للسغدي)
وعَلى هَذَا الْقِسْمَة إِذا قعت فِيمَا يجْرِي فِيهِ الرِّبَا لَا تجوز مجازفة فِي الْجِنْس الْوَاحِد وَتجوز فِي مختلفي الْجِنْس (ص32 – كتاب تحفة الفقهاء – باب آخر منه أصل الباب)
وإن لم ينقد واحد منهما حتى تفرقا لم يجز؛ لأن هذا دين بدين، فإذا اشترى ديناراً بدراهم وليس عند هذا دينار ولا عند هذا دراهم فنقد أحدهما وتفرقا لم يجز؛وإذا اشترى شيئاً بدين وهما يعلمان أنه لا دين عليه لا يجوز الشراء، ويكون هذا بمنزلة ما لو اشترى بغير ثمن؛ لأنه سمى ما لا يصير ثمناً (المحيط البرهاني في الفقه النعماني)
Based on the Hanafi school and on the question as it was asked. Another mufti may reach a different conclusion. Read the disclaimer.