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Subject : Ruling on Delaying Making Payment on the Spot in Exchange Contracts
Fatwa Number : 3183
Date : 20-03-2016
Classified : Usury (interest) &Loans
Fatwa Type : Search Fatawaa

Question :

The Ministry of Awqaf and Islamic Affairs conducts a request for proposal from Islamic banks to determine the Saudi Riyal exchange rate against the Jordanian Dinar for each season of Haj and for a period that could extend to ten months. This is in pursuit of the following ends: 1-Determining one rate throughout the season to cover all expenses in the Saudi Riyal or  the corresponding Jordanian Dinar. 2-Paying for housing prices and services in the Kingdom of Saudi Arabia in Saudi Riyal at the exchange rate to avoid price differences that could lead to losses, in the event of exchange rate appreciation. 3-Stabilizing the exchange rate of the Saudi Riyal against the Jordanian Dinar upon determining costs due on the Haj performers over the period of  the Haj season to avoid price differences for the same services provided to them. What is the ruling of Sharia on the previous procedure?



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.

In principle, Sharia obligates making payment on the spot in exchange contracts when the sorts are different, but share the same Illah (Legal cause). An-Nawawi said, "Jurists are agreed that it isn`t permissible to sell a usurious item for another of the same sort on delayed terms. Also, it isn`t permissible that the contracting parties separate before making payment on the spot when selling an item for another of the same or different sort, but share the same Illah, such as gold for silver." {Shareh An-Nawawi ala Muslim, 11/9}. Thus, it isn`t permissible to agree on a future exchange rate at a certain rate for this is delay usury. Rather, it must be according to the exchange rate on the day the deal is concluded. Narrated Abdullah ibn Umar: I used to sell camels at al-Baqi for dinars and take dirhams for them, and sell for dirhams and take dinars for them. I would take these for these and give these for these. I went to the Messenger of Allah (PBUH) who was in the house of Hafsah. I said: Messenger of Allah , take it easy, I shall ask you (a question): I sell camels at al-Baqi'. I sell (them) for dinars and take dirhams and I sell for dirhams and take dinars. I take these for these, and give these for these. The Messenger of Allah (PBUH) then said: There is no harm in taking them at the current rate so long as you do not separate leaving something to be settled. {Related by Abu Dawud}.

In conclusion, it isn`t permissible to agree on a future exchange rate at a certain rate over a period of time because payment isn`t made on the spot and is on delayed terms. These conditions must be met in order for the exchange contract to be considered lawful. 

As for giving a non-binding promise in this regard, there is nothing wrong with it, and this is stipulated in the AAOIFI Sharia Standards (Standard No. 1/2/9). This is provided that the promise isn`t tied with what indicates that it is a contract. In other words, the promise is non-binding to both parties and the exchange contract is concluded on the spot. And Allah the Almighty knows best.   






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