Friday, November 30, 2012

Buying shares then selling them to get money for his brother (tawarruq)

My brother asked me to take out a loan from the bank in my name, in
the form of shares, and then sell them and give him the price in cash,
and he will pay the bank the instalments in full. I am uncomfortable
about this matter because he ispaying more than he took. What is the
ruling, may Allah bless you?.
Praise be to Allaah.
Firstly:
This transaction comes under the heading of tawarruq using shares
[tawarruq means buyingan item to be paid for at a later date, then
selling it – to someone other than the person from whom one bought it
– for cash, usually at a lower price], and calling it a loan is
clearly incorrect. This is why you felt uneasy about it, because if it
were a loan,it would not be permissible to pay more than you take.
We have previously discussed tawarruq using shares and the conditions
of its being permissible in detail, in the answer to question no.
118270 .
If the conditions of permissibility are met in this transaction, then
there is nothing wrong with you getting involved in it in order to do
an act of kindness to your brother. So long as the transaction is in
yourname, your giving the money to your brother isby way of a loan. So
if you buy the shares from the bank for 100,000 – for example – and
you sell them for 90,000, you are lending 90,000 to your brother, and
he is taking responsibility for the remaining ten thousand that
belonged to the bank, which you had to pay because of him. If the
lender is doing a favour to the borrower, he should not be penalised
for that. "No ground (of complaint) can there be against the Muhsinoon
(good-doers)" [al-Tawbah 9:91]. This is not regarded as a loan that
brings a benefit, because in fact it does not bring you any benefit
except in the Hereafter, in sha Allah. Concerning the reward for
giving a loan, the Prophet (blessings and peace of Allah be upon him)
said: "There is no Muslim who lends something to another Muslim twice,
but it will be like giving charity once." Narrated by Ibn Maajah
(2430); by Ibn Hibbaan in his Saheeh; and by al-Bayhaqi in a marfoo'
mawqoof report. Classes as hasan by al-Albaani in Irwa' al-Ghaleel,
5/225
And Allah knows best.

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