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Search Fatawaa

Subject : Ruling on Murabaha Contract of the Military Trust Fund

Fatwa Number : 2044

Date : 14-05-2012

Classified : Current Financial Issues

Fatwa Type : Search Fatawaa

Question :

What is the ruling of Sharia on dealing in the Murabaha contract of the Military Trust Fund?

The Answer :

All perfect praise be to Allah the Lord of the Worlds. May His peace and blessings be upon our Prophet Mohammad and upon all his family and companions. 

Having examined the amended Murabaha contract* of the Military Trust Fund (See enclosed copy), it was found that it is free of violations of Sharia, so it is permissible to deal in. However, it includes some conditions which should be dwelt upon and their consequent financial obligations considered carefully. This is in order to be aware of all the details included in this contract and have enough satisfaction to engage in it.

Moreover, the Fund`s management must abide by the specific conditions of the Murabaha contract of sale. The most important condition is that the Fund must actually possess the commodity before selling it to the buyer/client so as to make compensation in case of damage. Also, the Fund may not oblige the latter to purchase the commodity in case he changed his mind before conclusion of contract. You (Asker) may check these conditions in Fatwa No.(683) issued by the General Department of Iftaa`.

It is worth drawing attention to a serious issue in this regard, which some financial institutions practice. It is deputizing a relative of the client to purchase the commodity on their behalf, then deliver or sell it, or deputize the client himself to do so. From the viewpoint of the General Iftaa` Department, financial institutions must avoid resorting to this kind of tricks and preserve the original form of the Murabaha sale contract  mentioned in the books of the scholars.

In conclusion, if the management of the Military Trust Fund doesn`t abide by these and other conditions, then it is forbidden to engage in any dealings with them. And  Allah the Almighty Knows Best.

*(A contract of sale between the bank/financial institution and its clients for the sale of goods at a price plus an agreed profit margin for the bank/financial institution).    



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