Bay bil Wafa

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Sale with the option of the seller to repurchase the property by paying the purchase price.

Economically is a kind of collaterialised facility, whereby the item purchased by the financer may derive benefits to the purchaser during his ownership.

Islamic rulings differ

According to the OCI Fiqh Academy such a transaction is impermissible. Other opinions are given by the Shariah Advisory Council in Malaysia, which rules it permissible. Also the Hanafi Mejelle does permit the transaction.

The reasoning for the prohibitive view is that Bay Wafa is considered a circumvention to receive Riba for a loan. The purchaser pays cash and has during his ownership a benefit from the good purchased.

The reasoning for the permissive view is that that it is supposed to be an effort to prevent the occurrence of riba. It was permitted due to society’s demand (see MIFC Link) and because it had become the social `urf / habit in many places.