The Lajnah (Permanent Committee For Scholarly Research And Ifta’) was asked the following question:
Is the increment that sellers add to the price of a credit sale considered to be Riba (usury) or not? For example, if the cash price of a commodity is 500 Dirhams, whereas if the payment is made in installments, a percentage is added to its price of about 5 or 10%. Is this increment considered Riba or not? Please provide a convincing answer with evidence.
If an item is sold on credit for more than its actual value, and its deferred credit price is specified at the time of the sale with an increment, there is nothing wrong with this, whether the price is paid as one installment or on multiple fixed-date installments. It was authentically reported in the two Sahih (authentic) books of Hadith (i.e. Al-Bukhari and Muslim), on the authority of `Aishah (may Allah be pleased with her), that Barirah made an agreement with her masters to buy her freedom for 9 Uqiyyahs (1 Uqiyyah = 40 Dirhams of silver = 119 grams); paying every year one Uqiyyah.
This was an installment sale.
May Allah grant us success. May peace and blessings be upon our Prophet Muhammad, his family, and Companions.
The Permanent Committee for Scholarly Research and Ifta’
AbdulFattaah Bin Uthman