Bai' bithaman ajil - ijaraCDC

Bai’ bithaman ajil

Bai’ bithaman ajil – Islamic Finance Defered Payment Sale

Bai’ bithaman ajil, which is a type of deferred payment sale, is a sale of goods on a price where the payments will be deferred. This includes a profit margin that is agreed upon by both parties in this type of Islamic finance. A Bai’ bithaman ajil is used under a type of facility that deals with Islamic finance. The deferred payment of interest can be avoided since the customer will pay the sale price and that differs from interest that is charged on a loan. The bringing together of two financial transactions is not allowed under the shariah (Islamic law). Basically in a Bai’ bithaman ajil there is interest charged that looks much like a sale.

Bai’ bithaman ajil can be an agreement involving interest where a financial institution will buy back an asset and then will sell that asset to a 3rd party at price that is agreed upon. The customer will have to pay back the money with a deferred payment, such as in installments, over a period of time that is defined by the Islamic finance institution. Bai’ bithaman ajil is much like a typical sale and purchase agreement where the merchant will allow the buyer to use deferred payments in order to pay the price of the sale. However, the Islamic finance aspect of Bai’ bithaman ajil the sale must be in line with the requirements of the shariah.

Basically a Bai’ bithaman ajil is a deferred payment sale and purchase agreement that is compliant with the shariah. The sale price of the asset will also have a profit margin and this will not be an interest payment. An individual will not have to own a legal interest or even be the property owner to sell their property in the Bai’ bithaman ajil Islamic finance transaction. After the customer has gone through with the sale and purchase agreement with the merchant they can then sell the right of that property to the Islamic finance institution for the amount of the loan.

The shariah does not dictate how the price of the aforementioned sale is determined just focuses mostly on the practice of charging interest. All in all the sale is basically the amount that both parties in the deferred payment agreement agree to mutually loan and the other, to pay back. Because of this there is not anything that can keep the seller from bringing together the sale price to the time period that the credit will be extended. The deferred payment must be paid off, but the time period in this aspect of Islamic finance must be agreed upon by the buyer and the seller.