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The Principles and Practices of Shariah in Islamic Finance - page 27 / 49





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Direct payment of purchase or cost price to the supplier

Non-contractual discount on early payment

Contractual discount on early payment


40. Rescheduling of debt in another currency is not permissible. However, full settlement of outstanding debt in another currency is permissible and it shall be executed based on the exchange rate of the settlement date.

Illustration 10: Settlement of Murabahah in Another Currency

A purchase orderer currently owes an IFI a sum of Euro70,000 for a house financed under Murabahah sale two years ago. Given the fact that the purchase orderer’s income is paid in US dollars, and being mindful of exchange rate risk exposure, the purchase orderer requested the IFI to fully settle his debt in USD instead of Euro.The exchange rate during the time of concluding the contract was Euro1 to USD1.10, but at the time of the proposed full settlement of the debt, the rate rose to USD1.20. The amount to be settled in USD is converted at USD1.20 per 1 Euro which is USD84,000.

    • 5.2

      Modes of Payment

  • 41.

    The IFI shall make payment directly to the supplier. Alternatively, such payment may be made through the purchase orderer who has been appointed as an agent of the IFI.

  • 42.

    The IFI may consider, at the time of pre-payment or early settlement, waiving part of the outstanding payment in the form of a discount to the purchase orderer for settlement before the maturity date.

  • 43.

    Alternatively, both the IFI and the purchase orderer may incorporate a pre-agreed clause in the contract for such a discount or rebate in the case of early settlement.

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