Buying at a Higher Price Because of Deferred Payment

Sheikh Ahmad Kutty, a senior lecturer and Islamic scholar at the Islamic Institute of Toronto, Ontario, Canada, states: “Islam, being a complete way of life, takes into account the practical conditions and circumstances that people face in their lives. The laws of Shari`ah are based on the infinite Mercy and Compassion of Allah and they are ultimately intended to cater to the supreme welfare and well-being of His servants. These laws, therefore, aim at bringing ease and comfort for humans, and ward off evil and spare them harm and suffering.
While there are certain things which are totally forbidden in Islam because of their intractable evil consequences, there are many things that are permissible, even though some of the latter, when looked at from a narrow perspective, seem to be impermissible or unlawful. This type of transaction belongs to the latter category; in other words, although it may look like it is unlawful, nevertheless it has been considered as permissible in order to facilitate the life of people. This permission takes into account the ease and comfort inherent in the Shari`ah. Almighty Allah says: “He has not appointed for you any hardship in your religion.” (Al-Hajj: 78). He also says: “Allah wishes to grant you ease and comfort; He does not wish to make things hard on you.” (Al-Baqarah: 185)
This type of transaction is based on the principle of charging a higher price for a commodity in lieu of the fact that payment date is set at a future date. If it had been considered haram (unlawful), it would cause lot of hardship for ordinary farmers, workers, or people who do not have sufficient cash or resources to pay for something that they need to acquire immediately. In other words, a person who cannot afford to pay for a commodity nevertheless acquires it by offering the seller a higher price. So long as everything in the transaction is known to both parties such as the commodity, the price and the date of payment, it shall be deemed as permissible.
There is no disagreement among any of the four schools of jurisprudence (Hanafi, Maliki, Shafi`i or Hanbali) concerning the permissibility of the above transaction. They have based their opinions on the authentic reports from the Prophet (peace and blessings be upon him), which clearly establish the permissibility of such a transaction. Thus, we read in the sources that the Prophet (peace and blessings be upon him) entrusted `Abdullah ibn `Umar with the responsibility of preparing the army for a military expedition. Accordingly, `Abdullah made deals to acquire mounts by offering to pay almost double the price for a single mount. We are also told that the Prophet (peace and blessings be upon him) purchased some food stuff from a Jew for a higher price to be given at a future date.
Based on such established precedents as well as received opinions of the great scholars and imams sanctioning such transactions, Imam Ibn Taymiyah has concluded that such a transaction is permissible according to the consensus of the community.
In light of the above, we can rightly conclude that the income derived from such transactions is considered lawful, and those who are participating in them are acting in perfect compliance with the provisions of the Shari`ah.
So, you are allowed to make use of the ease and latitude in the Shari`ah to promote the welfare of the country and increase its productivity. May Allah make us instruments of goodness in all forms. Ameen.”