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Islamic Finance




Bay’


An Arabic term (بيع) that translates as “sale” or “selling”. It refers to any agreement between two parties: the seller and the buyer in which the ownership of the subject-matter of sale is transferred from the seller to the buyer in exchange for a specific price (thaman). In essence, bay’ belongs to a broader category known as muawadhat (uqud al-muwadhah) which consists of all commutative exchanges of countervalues (including also: ijarah, sarf, etc.)

Shari’a permits sale in absolute terms (on the basis of the Quranic verse: “.. and Allah has permitted sale (i.e., trading) and forbidden riba..” [Verse 2: 275]. However, not every type of sale is permissible. For example, short selling is forbidden on the basis of the Prophetic maxim (hadith: “don’t sell what you don’t own (or which you don’t have)” [It is recorded by Ahmad (402/3), Abu Dawood (3503), At-Termezhi (1232), Ibn Majah (2187)].



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