Question
My Question is as follows:
I am working for a muslim owned company.
We have debtors that purchase from us on an ongoing basis. Some pay within 30 days some never pay at all.
I have identified a company called credit guarantee to provide assurance that credit limits are limited as per their financial statements.
The company then evaluates all the debtors an irrespective of payment terms
A fixed monthly is paid per debtor for example R 1000 per debtor. If there is 15 Debtors the monthly insurance amount will be R 1000 x 15 = R 15,000.
If one debtor has to abscound payment and lets he owes us R 25,000 the insurance provider will cover the loss for the full amount.
Is the above permissble?
Below is the link for credit guarantee and definition of what they do:
http://www.creditguarantee.co.za/about_credit.htm
What is Credit Insurance?
Simply put, it is the insurance of your debtors. An insurance policy is issued, covering your domestic or international debtors if you are an exporter. We investigate each of your debtors and issue cover against payment default by them.
Credit insurance is a powerful business tool and your company will immediately benefit in the following ways :
- Banks are likely to offer you more extensive credit facilities on more favorable terms if your debtors are credit insured
- Credit insurance gives you the absolute confidence to explore higher risk business opportunities you would normally avoid for fear of non payment
- It protects your cash flow by replacing cash promptly, should any customer’s insolvency or payment default occur
So why take unnecessary risks when for a nominal fee, bad debt can be eliminated. By simply insuring your debtor’s payment risk with Credit Guarantee, you will be secure in the knowledge that you’ll always be paid.
Answer
Muhtaram / Muhtaramah
In the Name of Allāh, the Most Gracious, the Most Merciful.
As-salāmu ‘alaykum wa-rahmatullāh wa-barakātuh.
Credit Insurance is not permissible because just as other forms of insurance, it contains elements of gharar (uncertainty) and qimaar (gambling). Contemporary Fataawa, Mufti Taqi Uthmaani, Pg 186
And Allah knows best
Wassalam
Darul Iftaa, Madrassah In’aamiyyah
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