Contracts and Deals in Islamic Finance. Kureshi Hussein

Чтение книги онлайн.

      The International Financial Services Board, a standard-setting body for Islamic banks, defines bai al inah as follows: “A contract involving the sale and buy-back transaction of assets by a seller. A seller sells an asset to a buyer on a cash basis and later buys it back on a deferred payment basis where the price is higher than the cash price. It can also be applied when a seller sells an asset to a buyer on a deferred basis and later buys it back on a cash basis, at a price which is lower than the deferred price.”13

      Bai al inah refers to an arrangement that involves a sale and buyback. An asset is sold by a seller to a counterparty on a deferred payment basis, creating a debt obligation on the said counterparty. Immediately, the original seller buys the asset back for a spot price. This second leg of the transaction creates the cash flows that resemble disbursement of a loan. As bai al inah is a sale contract, it must follow the requirements of contract law for sale and purchase transactions. A sale contract requires 14 conditions:14

      These rules apply to almost all the sale transactions and must be borne in mind by the reader. These rules are simple enough, so now let us revert to the exclusive sale contract of bai al inah. We explain the sale by using illustration for ease.

      Bai al Inah in essence is a combination of bai mu'ajjal and bai haal, a sequence of a deferred sale followed by a spot buyback. These terms will be clearly explained in the subsequent chapter.

      Bai al Inah Process Flow

      We illustrate the process flows in bai al inah by using a simple example involving two parties, A and B.

      Party A wishes to use his asset of value $10,000 but wishes to convert the asset into cash of $10,000 and at the same time does not wish to surrender ownership rights to the asset.

      Parties A and B agree to a spot sale price of the asset of $10,000, and a deferred sale price of $12,000 if the payment is made in 90 days.

      Step 1. Party A sells the asset to Party B on a deferred payment basis. Party B pays undertakes to pay Party A, $12,000 in 90 days and Party B now enjoys full ownership rights over the asset. Party B can sell the asset to another Party C, enjoy the usufruct of the asset, or sell the asset back to A.

      Step 2. Party A instantaneously buys the asset back from Party B at a spot price of $10,000. The asset is transferred back to ownership of Party A, who has his or her original asset back, and has in receipt an obligation from Party B to pay Party A, $12,000 in 90 days. The sale contract concludes with asset remaining with the ownership of the original party and the creation of a debt obligation due on B to A.

      Figure 2.1 Parties to the Contract

      Figure 2.2 Step 1 – Party A Sells to Party B

      Figure 2.3 Step 2 – Party A Buys Back from Party B

      Step 3. At contract conclusion Party B pays the deferred price of $12,000 to Party A.

      The previous sequence of transactions treated separately are merely two sales transactions between two parties, but for a credit price and for a spot price. However, when they are combined they resemble a granting of a loan from Party A to Party B of $10,000 with a repayment of $12,000 in 90 days. There is no questioning that the two sales contracts combined have developed a suspicious likeness to a loan with an interest repayment and hence riba.

      Figure 2.4 Step 3 – Party B Pays Deferred Price to Party A

      It seems quite judicious to question the intentions of both Party A and Party B. It seems that Party B has no real intent (however, it may remain undisclosed) to own the asset that is the subject matter of the “sale.” At each stage of these transactions the ownership of the asset is transferred from A to B; there is also no payment of any sales tax as in reality these transactions are just paper-based. Although there is a transfer of ownership from one party to another via sale and purchase agreements, there may not be any transfer of possession.

      Another area of controversy lies in the fact that the first sale transaction is conditional on the second sale. A will sell the asset to B for $12,000 on the implicit or explicit condition that B will sell the asset back to A for $10,000. As per Islamic contract law, one contract cannot be made conditional to another, based on the hadith of the Prophet (saw, pbuh) that states that two transactions cannot be combined into one.15

      Nevertheless, the impact of the contract is as follows: Party A sells an asset for $12,000 and buys it back for $10,000, making a profit of $2,000 over a period of 90 days and Party B is able to raise $10,000 of funds for 90 days with committing to repay $12,000 in 90 days.

Let us look at a riba contract in Figure 2.5.

Figure 2.5 Riba Contract

      Can the reader observe any substantial difference between both the contracts? One is a set of contracts of sale, where an asset is sold and then bought back. The other is a contract of lending, where A lends B money. Money here is treated as the СКАЧАТЬ