Bi-muajjal: An Islamic Mode of Finance Without Interest or Debt

Bi-muajjal is a contract between a buyer and a seller, where the seller sells certain specific goods to the buyer at an agreed price, payable at a future date or in installments. So, it’s like a loan with interest? No, it’s not. Interest is forbidden in Islam. Bi-muajjal is a sale, not a loan. The price is fixed in advance and includes a reasonable profit margin for the seller.

How do you determine what is reasonable?

There are some guidelines and regulations in Islamic law and banking to ensure fairness and transparency. For example, the seller must disclose the cost price and the profit margin to the buyer, and the buyer must pay the agreed price on time.

Why don’t you just use cash or credit cards?

Cash is not always available or convenient, and credit cards involve interest and fees. Bi-muajjal is a way of facilitating trade and commerce without involving interest or debt.

But what if the buyer defaults or the goods are damaged or defective?

The seller bears the risk of the goods until they are delivered to the buyer. If the buyer defaults, the seller can take legal action or seek arbitration. If the goods are damaged or defective, the seller is liable unless there is an agreement with the buyer to release the seller from such responsibility.