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Fatwa CenterSelling shares purchased on credit for cash
Question
bismillah,assalamaoalaikum,what is the ruling on taking loan from rajhi bank, whatever additional money they charge is service charges/paper work(im not sure)Suppose i'm taking 150000 riyals,. I have to return in 4 years as monthly installment of 3300,(a total of 150000 plus 8500 additional ammount=158500). is this additional 8500 ribaThe brochure of rajhi bank gives the following breakdown for loan of 50000 riyalsfinance ammount : 50000term cost : 3.86%Tenure: 60 monthsMonthly installment : 916 riyalsmanagement fee: 500 riyalsTadawul transfer fees: 70Tadawul Purchase fee(0.0012): 60 annnual percentage rate: 4.44%
Answer
All perfect praise be to Allaah, The Lord of the Worlds. I testify that there is none worthy of worship except Allaah, and that Muhammad 
is His slave and Messenger.
The transaction you mentioned is not a loan but a transaction of Tawarruq (which is to sell something for cash which was purchased on credit); and here the object of trade is stocks. You should be careful to call transactions by their proper names and terminology. Profit from trade is permissible but profit from a loan is Riba (interest and/or usury), which is forbidden.
In any case, a requirement for Tawarruq is that the shares are in something permissible in Sharee'ah. It is also a condition that the bank owns the shares, and these shares should be under its disposal and liability before it sells them to the purchase orderer.
As regards the administrative fees, they do not have any effect on the transaction and they do not involve Riba. As we have already mentioned, the transaction is a sale and not a loan. Also note that actual administrative fees in a loan are permissible. What is forbidden is the profit that the lender (creditor) acquires on the loan.
Allaah Knows best.
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