Question:
He (the questioner) asks about jewelry shops in Singapore where customers pay a fixed amount every month as instalments, and the amount is converted into gold weight (grams) and recorded. In such schemes, after completing 11 months of instalments, the 12th month instalment is given free. However, the amount cannot be taken in cash; it must be taken only as jewelry. Whether this comes under interest (usury).?
Answer:
Suppose a jewellery shop runs such a scheme. They say that you must pay, for example, ₹1 lakh every month. When you pay the first ₹1 lakh, they calculate how much gold you can get for that amount based on that day’s gold price and record it in your name. They do not treat it as a cash deposit but as jewellery weight credit.
For example, if ₹1 lakh equals one sovereign of gold on that day, they record one sovereign in your account. Next month, if the gold price falls and ₹1 lakh equals 1.25 sovereigns, they credit that amount. If gold price increases and ₹1 lakh equals only half a sovereign, they credit half a sovereign. Thus, every month they record gold based on the market price of that day. This part is acceptable and has no issue.
After paying for 11 months, you would have paid ₹11 lakhs. When the 12th month arrives, instead of collecting instalment from you, the shop says they will pay that instalment on your behalf. So, you can take jewelry worth ₹12 lakhs, though you paid only ₹11 lakhs.
They will not give you cash for the 12th month. Instead, they will add jewelry according to the current market rate. So effectively, you pay ₹11 lakhs but receive jewelry worth ₹12 lakhs.
The question is, under what category does this extra ₹1 lakh fall? Why are they giving this amount? It is because your money remained with them for 11 months. When you paid the first instalment, they did not immediately give jewellery; they only recorded it on paper and used your money for business rotation. The second instalment remains with them for 10 months, the third for 9 months, and so on. Thus, your monthly payments become their investment capital.
Even if they started with an empty shop, by collecting money through such schemes, they could stock jewellery worth crores. It becomes like a chain system where new customers keep joining. There is also risk because if business fails, customers may lose their money.
The speaker argues that the shop can only give this extra installment because they are using customers’ money to earn profits, often by lending or investing it elsewhere with interest. From that profit, they give the extra benefit.
If one shop has 1,000 customers in such schemes, they would need to give huge amounts as bonus installments. The argument is that this extra payment is essentially interest earned using customers’ money.
The speaker advises that instead of joining such schemes, if someone wants to save money for gold, they should directly buy gold every month according to their savings. For example, they could buy gold biscuits or coins of 24 carat gold. That way, they would own the gold immediately, and it would remain as savings without involving interest-based systems.
He concludes that such jewelry installment schemes amount to clear interest in disguised form. He further claims that some people exploit public dislike of interest and deceive them through such schemes while continuing to profit from interest-based practices. Therefore, he advises not to join such schemes.