SYARIAH IN ISLAMIC

BANKING & FINANCE

Chapter 9:Bay’ Al-Inah

Definition & Nature of Bay’ Al-‘Inah

1.

• Linguistic Definition of Bay’ Al-‘Inah

• salaf, or contracting a loan. It is used in this
meaning to refer to purchasing on credit
• one purchases an asset for its subsequent
sale on cash

• Technical Meaning of Bay’ Al-‘Inah

• sale of a commodity on credit and
repurchasing it for a lesser amount in cash

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2. Types of ‘Inah
The First Type
• explicit statement of intention to enter
into a twin contract

• repurchase asset cash price lower than

the former deferred price

• invalid and impermissible by the

consensus

2. Types of ‘Inah
The Second Type
• twin sale
• the commodity is sold to the second party on credit, is
delivered to him
• seller repurchases it at a cash price lower than the former
credit price, without there being any condition in the
contracts that necessitate it
• contracts in this case are independent
• a complete and full-fledged contract not made
conditional to the other
• results in the creation of legal consequences in the
form of rights and obligations on the parties
• Shafii School hold this type reprehensible, though,
valid, while some others hold it invalid

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2. Types of ‘Inah
The Third Type
• three or more parties involved
– a person purchases an asset from another and
takes possession of it
– thereafter selling it to the seeker of inah on
credit, at a price higher than the initial cost
– seeker of inah, after purchasing the asset, sells
it back to the original seller at a lower cash
price
• considered to be of lesser significance
• Some forms correspond to tawarruq

3.Legitimacy of ‘Inah According to Muslim

Jurists

• The Maliki Jurists-invalid

• The Hanafi Jurists-invalid
• The Shafi Jurists-valid and reprehensible
• The Hanbali Jurists-invalid

4. Denouncers of ‘Inah
• The overwhelming majority of Muslim jurists
have disapproved inah as a transaction that it
could involve riba

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5.Proponents of ‘Inah
Jurists of Shafi’i school
Shafi’i jurists avoid from providing any direct solution
to this justifiable concern, apart from leaving the
intentions of the participants to themselves, to be
accounted for in the divine presence if found to be
foul
Jurists of Zahiri school
Because all the requirements of a sale are fulfilled

6. The relevance of Intention to ‘Inah

An important aspect that contributes to the
divergence of opinions pertaining to the legality
of inah is the aspect of motive or intention

7. Suitability of ‘Inah as a Mode of Finance

An overwhelming majority of jurists have

declared inah to be invalid judging it as a
mode that could be easily misused for
legitimising riba
many modern jurists that the danger perceived
by those who denounce inah is obviously real,
and could not be brushed off as imaginary or
unconfirmed
its recognition by the Shafi’i jurists mainly
centres on safeguarding transactional rights of
a person in his own property & removing
unnecessary restrictions in this regard

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7. Suitability of ‘Inah as a Mode of Finance

If the mode of inah is allowed

it would provide an extremely convenient way
of practising debt financing along conventional
lines
conversion to Islamic banking would only
involve a cosmetic change from interest-based
lending, adopting some transactions that are
not intended primarily, but are only carried out
as a formality
implementing a full-fledged Islamic banking
system based on genuine modes of financing
would remain a distant dream

The End

Thank You