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Islamic Finance




Arbun


Arabic (عربون) for down payment, “partial” payment in advance, or security deposit. The payment/ deposit is intended to secure a sale transaction (ba’i/ bay) or a similar transaction. In a commutative contract, this involves the payment of part of the price (thaman) or consideration (badal/ iwadh) by the potential buyer to the seller for the underlying object or service, etc. If the buyer proceeds with the transaction, the partial payment will actually be considered part of the price, where the seller only pays the difference between the original price and the down payment (arbun), given that the amount of around was already paid to the seller. Otherwise, if the potential buyer refrains (i.e., does not proceed with the transaction), the down payment can be forfeited by the seller.

The majority of fuqaha (jumhur al-fuqaha) consider arbun and ba’i al-arbun void and impermissible (however, Hanbalis provided specific source-based grounds for its permissibility).



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