Housing Credit

Ruling of Triangle-Shaped Credit

Triangle-Shaped Credit



Ustadz, there is a friend of mine who is offered to work in an optic shop. Aside from providing cash payment service, the store also give credit facility through certain bank by paying the down payment to the store first. Is this kind of transaction allowed? May he work in that store?

May Allah reward you with goodness.

From: Jumardi



This kind of transaction is included in the triangle-shaped transaction. Here is the complete explanation for you:

In the past, credit was only done by two parties: the seller and the buyer. It has undergone some changes, where credit today generally involves three parties: buyer, seller, and funding institution. This kind of credit is known as triangle-shaped credit.

Ruling of Direct Credit

Direct credit between a goods’ owner and a buyer is lawful transaction in Islam. Even though the price costed through credit system is more expensive than the cash price. This is the strongest opinion and chosen by majority of scholars. It is ruling is based on several indications below:

Firstly, Allah decree,

“يَآأَيُّهَا الَّذِينَ ءَامَنُوا إِذَا تَدَايَنتُمْ بِدَيْنٍ إِلَى أَجَلٍ مُّسَمًّى فَاكْتُبُوهُ

“Believers! Whenever you contract a debt from one another for a known term, commit it to writing.” (Chapter Al Baqarah/The Cow:282)

The contract of credit is one of the many forms of debt contract. Thus, the general scope of this verse is the basis to allow credit.

Secondly, a hadith from ‘Aisha -may Allah be pleased with her- that the Messenger of Allah -peace and prayer of Allah be upon him- bought some foodstuffs from a jew man with postponed payment, and he mortgaged his shield to him. (Muttafaqun ‘alaih)

Thirdly, a hadith from Abdullah bin Amr bin Ash -may Allah be pleased with him-:

“The Messenger of Allah -peace and prayer of Allah be upon him- ordered me to prepare the troop, whereas we didn’t have any mount to ride. The Prophet -peace and prayer of Allah be upon him- ordered Abdullah bin Amr bin Ash to buy some mounts with postponed payment until the time of zakat payment come. Then Abdullah bin Amr bin Ash bought every one of camel with the price of two camels that will be paid at the time of zakat payment.” (Narrated by Ahmad, Abu Dawud, and classified as good hadith by Al Albani).

It shows that it is permitted to raise the price of goods bought by credit, even though it reaches twice the normal price. As for hadith that said, “Whoever accomplishes two transaction of selling and purchasing in one transaction, then he is only allowed to take the lowest price, if he doesn’t, then he has fallen into committing usury.” (Narrated by Ahmad, Abu Dawud, and classified as good hadith by Al Albani).

This is a valid hadith, but the correct interpretation of it is as explained by Ibn al Qayyim and other scholars, that it is a prohibition to transact using the ‘inah method.

‘Inah is when, for example, A sold a cell phone to B with the price of IDR 1.2 million by credit. Then B resold it back to A with the price of IDR 1 million by cash. Then A handed over the payment of 1 million to B and took the cell phone with him. Whereas B still have to pay the installment of his 1.2 million of debt to A.

Ruling of Triangle-Shaped Credit

To make it easier to understand this model of credit, let us examine the illustration below:

In a showroom of motorcycle dealer, a motorcycle was displayed with the tag price of IDR 10 millions by cash, and IDR 17 millions by credit. Came Mr. Ahmad to buy a motorcycle by credit. After the deal, he will be asked to fill a form and sign it, and usually he should hand over a collateral, and down payment.

After this contract of selling and purchasing completed, and the buyer took home his newly purchased motorcycle, next, he is obliged to pay the installment to bank or funding institution, and not to the dealer where he transacted and received the motorcycle.

The existence of this third party prompts a big question, why should Mr. Ahmad pay the installment to bank or funding institution and not to the dealer where where he transacted and received his motorcycle?

The answer is simple, because bank or funding institution has signed a business deal with the dealer, which main point is if a buyer comes to buy by credit, then the bank will be obliged to settle the cash price of the motorcycle, and consequently, the buyer becomes bank’s client, thus bank is rightful to accept the installment. In the disciple of jurisprudence, this practice is termed as hawalah, that is, removing credit to a third party with certain stipulations.

Basically, contract of hawalah is permitted in shari’a. But the problem changes when hawalah is combined with the contract of selling and purchasing in one transaction. If we study the triangle-shaped credit as the example above, we can understand it through two perspectives:

First: Bank gave credit of IDR 10 millions to the motorcycle buyer, by it pay the motorcycle by cash to the dealer. Then the buyer should settle the installment of IDR 17 millions, as the price of purchasing by credit, to bank.

If this is the case, then this kind of transaction is clearly a usury of nasi’ah (usury of the ignorants). Seven millions added to the payment to bank is a usury. This kind of transaction is forbidden, as mentioned in hadith from Jabir -may Allah be pleased with him-, that the Messenger of Allah -peace and prayer of Allah be upon him- cursed the consumer of usury (moneylenders), the client, the scriber (secretary), and the two witnesses. He also said, “They are all equal in sin.” (Narrated by Muslim).

Second, bank bought the motorcycle from the dealer and resold it to its client (Mr.Ahmad from the case above). However, bank didn’t receive the motorcycle at all. It only transferred as much as the vehicle’s price in cash, then the buyer paid the installment to it. If in reality bank truly bought the vehicle, then it means that it has sold the vehicle that it bought before receiving it. Thus, bank or funding institution has sold an item that hasn’t belonged to it fully. As one of the proof, the administrative files of the motorcycle were directly signed over the name of the buyer, and not the bank, which then being changed into the buyer’s name.


Principally, the triangle-shaped credit is one of the camouflages for usury which is evidently forbidden in shari’a. Prohibition to sell thing before receiving it from the first seller is indicated in a hadith from Ibn Abbas -may Allah be pleased with him-, in which the Messenger of Allah -peace and prayer of Allah be upon him-. “Whoever buys foodstuff shouldn’t resell it until he has received it wholly. “Ibn ‘Abbas said, “And I think that everything holds the similar ruling as foodstuff.” (Muttafaqun ‘alaih)

Zaid Ibn Tsabit -may Allah be pleased with him- shared the same opinion, as indicated in hadith below:

From Ibn Umar -may Allah be pleased with him-, he said, “One day, I bought some oils in the market. After I bought it, there was a man who came to me and offered a bargain for the oil. Then he gave me a quite large profit, thus I accepted his bargain. When I was about to shake his hand, suddenly someone from behind held my hand. I turned and found out that he was Zaid Ibn Tsabit. He said, “Don’t sell the oil at the place you buy it, until you remove it to your place. Because the Messenger of Allah -peace and prayer of Allah be upon him- forbade a person to resell thing (that he bought) at the place he bought it, until it is removed to the his own place.” (Narrated by Abu Daud and Hakim).

The scholars explained some wisdoms beneath this prohibition, among which is; when bank bought the item from the dealer with the price of IDR 10 millions whereas it didn’t receive it at all, then it resold it to the buyer with the price of IDR 17 millions, then basically, this transaction is an exchange of IDR 10 millions with IDR 17 millions. This point is as Ibn ‘Abbas may Allah be pleased with him- said to his student, Thawus, when he asked about reason behind the prohibition in hadith from Ibn ‘Abbas above.

Thawus said, “I asked Ibn ‘Abbas, ‘How come?’. He answered, “Because what basically happened is a selling of dirham with dirham, whereas the foodstuff (handling over of foodstuff, -ed) is postponed.” (Muttafaq ‘alaihi)

Ibn Hajar explained about Ibn ‘Abbas saying, “If A bough foodstuff with the price of -for example – 100 dinars, and he had paid it to the seller (B) whereas he hadn’t received the foodstuff he bought, but then he resold it to C with the price of 120 dinars and he received the money right away from C, whereas the foodstuff that he sold was still in B’s place, then it is as if A had sold/exchanged (lent) 100 dinars with the payment of 120 dinars. As the consequence of this interpretation, this prohibition not only applies on foodstuff (but also on other commodities as well, -ed). ” (See: Fathul Bari, by Ibn Hajar Al-Asqalany 4:348-349)

Based on this explanation, we could draw a conclusion that house or vehicle purchasing with the triangle-shaped credit through leasing or funding institution that is practiced in our society is forbidden because it is one of the forms of usurious transaction.

Answered by: Sheikh DR Muhammad Arifin Baderi

Article of www.syaria.com

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