Ba’i al-inah (also spelled al-einah) is a type of buy-back sales in which the borrower and the lender agree (in collusion) to fictitiously use an object as a subject-matter of a sale transaction where the lender sells it to the borrower at a given price on a deferred basis (on credit) and repurchases it from him for a cash amount that is less than the deferred price. It may also take another form whereby the borrower sells an object to the lender at a specific price in cash and repurchases it from him on a deferred basis for an amount higher than the cash price. The result is apparently a riba-free loan (qardh). It is so but only in form and appearance. In substance, this is nothing less than a riba-based qardh, sugarcoated with a fictitious sale transaction.

In this way, ba’i al-inah is an illegal device that aims to circumvent the prohibited dealing in riba. Therefore, Islamic banks which are parties to murabaha transactions (literally, murabaha to the purchase orderer) have to be particularly careful that the objects of murabaha sale ordered by the client (potential purchaser) don’t already belong to that client or a business owned by him.

This is the shari’a view adopted by fuqaha in Arab countries (Arabian Gulf countries, Syria, Egypt, etc), which happens to be the mainstream ruling on ba’i al-inah. However, banking authorities in Malaysia don’t regard ba’i al-inah as such, and Islamic banks in that country overtly apply it in their everyday financial transactions and dealings.