Question Summary:
Shariah Compliant Alternatives

Question Detail:

I bought sofa set in installment and once again it was written in the receipt that the sofas will remain the property of the shop until paid in full. I said you can’t do that. They said we have to write this otherwise we won’t be able to claim legally our money in case the customer fails to pay the installment. Anyway, I cancelled my transaction and paid him in full. Any other alternative to avoid this besides taking collateral?

Answer :

In the Name of Allah, the Most Gracious, the Most Merciful.
As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.
Your assertion was correct since the transaction in reference was not Shariah Compliant.
Hereunder are some Shariah Compliant alternatives:
1. Ijarah (Renting/Hiring)
Ijarah is a facility where the seller hires out the commodity to the client without the option of an eventual purchase. The client merely hires the commodity from the bank.
2. Ijarah Muntaqisah (Diminishing lease)
Diminishing Ijarah refers to a facility where one party leases out the commodity for a fixed tenure while the other party slowly purchases the leased item. For example, Zaid leases out a sofa set to Amr for 12 months on monthly installments. Amr also pays a monthly installment to purchase the sofa set from Zaid. Amr’s rental installments decreases according to his proportionate rate of ownership in the sofa set. There are a few intricacies involved in this procedure, if you are interested in this, you may contact us for a detailed explanation on this.
And Allah Ta’āla Knows Best                                       
Ismail Desai,
Student Darul Iftaa
Durban, South Africa
Checked and Approved by,
Mufti Ebrahim Desai.