Selling on credit in instalments at an increased price is permissible

Question

Question: For farmers the tractor has become an extremely necessary item, and such things are not available in the markets; rather, the tractor is obtained from the World Bank. The arrangement is that the World Bank, for the convenience of purchase, fixes several “weeks” (periods) for the amount of the tractor, and in the fixed week the buyer has to pay the amount together with the loan markup. So two things in this question need clarifying: (1)

Answer

(1) You may buy it. (2) Compared with cash, the credit price is generally somewhat higher. The price may be fixed in this way: the full price will be paid in so many instalments, and the amount of each instalment will be such that it is somewhat more than with cash. This excess is what is called the loan markup; in terms of Shar‘i terminology it is not interest.

Source: Fatawa Mahmudiyya

Preview. The full text opens with JavaScript enabled.