BAI ‘INAH

DEFINITION OF ‘INAH
• Meaning of salaf, or contracting a loan.

• Used in this meaning to refer to purchasing on credit.

• Many of the descriptions given by jurists defined as a sale of a commodity on credit
and repurchasing it for a lesser amount in cash.

Narrated by the Companion Abdullah ibn ‘Umar:

“when men become frugal with money (lit. gold and silver coins) and trade on the basis of
‘inah, and (when they) follow the tails of cows and leave jihad in the path of Allah, Allah will
send down a trial that he would not remove until they revert to their religion”.
 Maliki jurist – to sell a commodity at a
known price on deferred payment, and to
purchase it subsequently from the
purchaser at a price that is less

The Hanafi jurist Ibn ‘Abidin – ‘inah as the sale of an item

at the profit on deferred payment, for its subsequent buyback
by the original seller at a lesser price, for the purpose of
settling a debt
Hanbali jurist, Ibn Qudamah –
selling a commodity to a person
for a deferred price, and the
repurchasing the same
commodity from him at a lower
price.
Shafi’I jurists –
selling of an item at a
higher, deferred price
and after delivery of
the subject matter, to
purchase it back from
the purchaser at a
lower price ,so that
the higher amount
remains a debt.
 TYPES OF ‘INAH
1) The parties make an explicit statement of their intention to enter into a twin
contract.
Example: the contract could read as follow “ I sell this commodity to you on
credit for one hundred and twenty, so that I will purchase back from you for
one hundred.
Invalid and impermissible.
2) The parties enter into twin sale, that is, the commodity is sold to the
second party on credit, is delivered to him, and thereafter the seller
repurchase it at a cash price lower than the former credit price, without there
being any condition in the contracts that necessitate it.
Shafi’e school hold this type is valid while some other jurists hold it invalid

3) There are three or more parties involved in this type of inah. Some forms
of this process appear to correspond with what is known as tawarruq.
 REVERSE ‘INAH

• The cash sale could precede the credit sale, where roles would be
reversed.

• Shafi’I jurist – who use the term ‘inah to denote this format as well, hold it
valid.
 LEGITIMACY OF INAH ACCORDING TO
MUSLIM JURISTS
• Opinion of Scholars are divided into two group ;

Proponent Denouncers
Of Bai ‘Inah Of Bai ‘Inah
1) Denouncers of Bai Inah
• Majority of the scholar including Hanafi, Maliki and Hanbali prohibit al-’inah
transaction on basic that it could involve riba’.
• Hanbali strongly denounced inah in their work.
• Hanbali too agree that where a person sells a commodity on credit and
thereafter repurchases it at less price of his former sale, the transaction is
invalid.
• The reason is that this could serve as an avenue leading to riba.
• However, if the second transaction is equal or higher, it is permissible.
• Adopting inah based mode, especially in the context of banking transaction
for the purpose of financing, has been prohibited by many contemporary
bodies of shariah scholar.
2) Proponent of Bai Inah

• Imam Shafie and supported by the hanafi jurist Abu Yusuf and Shariah
Advisory Council of Bank Negara Malaysia also Securities Commission of
Malaysia.
• Imam Shafie approved bay’ al-’inah as financing mode.
• “Allah has permitted trade and forbidden riba’”.Bay al-Inah is categorized
as buying and selling which is lawful and not riba based on the general
requirements of this verse.
• Jurists hold on this word with seeing when a contract is sufficient in terms
and conditions, then it does not count on fasid.
 Arguments Against the Validity of
‘Inah and Their Responses
• Based on hadith reported by ‘Aisyah, where she rebuked a Companion for
his involvement in a trading transaction corresponding to ‘inah is evidence
majority Muslim jurists support denouncing ‘inah.
• ‘Aisyah has stated that the practice of ‘inah could bring the annulment of
his jihad, in spite of the fact that no apostasy had taken place.
• Imam Shafi’e has stated in his al-Umm that it is quite possible that the
condemnation has arisen due to uncertainty in the period of deferment in
the first place.
• Hadith Narrated By ‘Umar
“When men become frugal with money (lit. gold and silver coins) and
trade on the basis of ‘inah and (when they) follow the tails of cows and
leave jihad in the path of Allah, Allah will send down a trial that he would
not remove until they revert to their religion.”

• ‘Inah is a serious offence that calls for such punishment

• Weak chain of narrators and ‘inah in the hadith carries other meanings
such as credit sale in general.
 ARGUMENTS FOR VALIDITY
• Proponent of the ‘inah sale who see it as two individual sale contracts
that are valid and not conditional on each other have cited in their
support, evidence based on al-Quran, Sunnah and logical reasoning.
• Point out that the validity of two individual transactions would not
necessarily be the same when they are combined with each other.
• Opponents cited combining 2 sisters in marriage n proponent point
out that there is no valid reason for considering the two transactions
of ‘inah as forming a single transaction.
 THE RELEVANCE OF INTENTION TO
‘INAH
• The divergence of opinions pertaining motive or intention.
• The foul intention assumed to be held by the participants.
• Invalid contract (Hanafi, Maliki, Hanbali): despite its legal
appearance, conceals an inner motive of earning riba.
• Shafi’i is only consider the external intent of the parties in deciding
the contract’s validity.
 SUITABILITY OF ‘INAH AS A
FINANCING MODE
• Invalid judging for majority of jurist as a mode that could easily misused for
legitimizing riba.
• Shafi’i mainly centers on safeguarding transactional right of a person in his own
property & removing unnecessary restriction.
• Valid if no intention has been explicitly manifested in the contractual text.
• The danger perceived by those who denounce ‘inah is obviously real & could
not be brushed off as imaginary @ unconfirmed.
• Would prove to be the death knell of other genuine modes.
• Would remain a distant dream.
 CONCLUSION
• Major part of the banking practices.
• Easy imitation to the conventional practices to be the most
preferable one.
• The difference in opinion of the jurists is moulded by the different
approaches taken by them on their reliance on outward expression
of the parties to the contract.