Theme: Other Business Transactions That Are Considered Riba

The Prophet (ﷺ) said:
“When you enter into the ‘inah transaction, (and) hold the tails of oxen (for tillage), then are pleased with agriculture and giving up conducting jihad (struggle in the way of Allah). Allah will make disgrace prevail over you, and will not withdraw it until you return to your original religion.

Narrated by Abdullah Bin Umar رضي الله عنهما
(Source: Sunan AbiDawood No.3462)

The hadith above prohibits us from abasement practices such as ‘inah transaction. ‘Inah transaction (sale with repurchase agreement) is defined, by scholars, as the sale and buy-back of an asset for a higher price than that for which the seller initially sold it.

The prohibition of ‘inah transaction can be of two forms:
1. ‘Person X’ sells to ‘Person Z’ an asset with deferred payment (i.e., $200), then buys back from ‘Person Z’ the same asset with spot payment (i.e., $150) that is lesser than the ‘deferred payment’. Here ‘Person X’ makes a profit of $50 from ‘inah transaction.
2. ‘Person X’ sells to ‘Person Z’ an asset with spot payment (i.e., $150), then buys back from ‘Person Z’ the same asset with deferred payment (i.e., $200) that is higher from the ‘spot payment’. Here ‘Person Z’ makes a profit of $50 from ‘inah transaction.

The main reason for ‘inah transaction to be prohibited is because it can be seen as a form of riba on loan contracts. Imam Ramli, in his book Syarh Sunan Abi Dawood, explains the reasons for ‘inah transaction to be prohibited and regarded as abasement practices that Allah disgraced. He stresses that those who made their earnings through ‘inah transactions do not bear the hardship of making a living and the risks associated with trading and production.

This, hence, leads to the disruption to real markets/industries that are beneficial for human lives. Moreover, his explanation implies that real economy trading practices are essential to safeguard the interest of human livelihood and are the reason for Allah’s barakah (blessings).

Imam Ghazali in his bookL, titled “Ihya’ Ulum al-Din” (Revival of Religious Sciences), mentions that: “there is no reason to the perpetual act of sin.. except for negligence and desire, and there is no (way) opposing negligence.. except knowledge, and there is no (way) opposing desire.. except patience in stopping the means for the desire”.