Question:
Due to financial difficulties, another person buys goods (clothes) for him and supplies them with added profit. He is asked to repay the amount in two months. He asks whether this is permissible?
Answer:
In this case, he does not have money to buy goods directly. Another person offers to buy goods from the market and give them to him on credit. Suppose the goods cost 100 rupees in the market; the supplier gives them to him for 105 rupees with two months’ time to repay. The question arises whether this is trade or interest.
In Islamic law, there is a clear distinction between trade and interest. Trade means fixing a price based on the value of goods. Interest means charging extra because payment is delayed or because the transaction is a loan. If someone says, “Pay 100 rupees if paid in cash, but 105 rupees if paid later,” then the extra 5 rupees is not part of the goods’ value but payment for the loan.
If he had money, he would buy goods directly for 100 rupees. Since he does not have money, another person intervenes, buys the goods, adds profit, and allows delayed payment. This method is considered a disguised way of making interest permissible. The Prophetﷺ taught that any benefit gained from a loan is interest.
If someone sells goods voluntarily at a higher price without linking it to a loan or delayed payment, it is trade. But if the increase is specifically due to giving time for repayment, it becomes interest. Many modern institutions, including so-called Islamic banks, follow similar methods. For example, if someone wants to buy a car costing ten lakh rupees, the bank buys the car and sells it to the customer with additional profit, claiming it is trade while actually functioning like interest-based lending.
If a lender truly wants to help, he should give a loan without additional profit. Charging profit in the name of trade while it is actually for delayed payment is considered interest. Some scholars wrongly interpret that interest applies only when money is lent and not when goods are involved. Historically, interest also existed in barter systems where goods were exchanged with excess in delayed transactions.
Therefore, separating money and goods in defining interest is incorrect. Any benefit gained from a loan, whether in money, goods, or services, is considered interest. Trade is pricing goods based on value, whereas interest is charging extra due to delayed repayment or loan period. Hence, this transaction clearly falls under interest and should be avoided.