We are looking at ways to help students pay for higher education while making profit for the investors. Can there be Murabaha and deferred payment for a service, such as education? For example, a postgraduate law degree costs $50k. A third party makes an arrangement with the University to pay the fees on bahalf of a specific student. The 3rd party makes a contract with that student to receive $55k in installemnts over 5 years after the student graduates. Does this avoid riba for the student and the 3rd party? Does it fall within the definition of Murahaba with deferred payment?
Murabahah is a sale contract where an item is purchased and sold for a higher price. As for tuition, this will fall under a service contract. A service contract creates an obligation on one party to provide a service and on the other party to make payment. It also entitles the latter to receive a service but not an asset. Hence, with tuition there is no asset as such which the third party can sell on for a higher price and therefore will not be a murabahah with deferred payment. The service to be received cannot be sold as it is just an entitlement to receive services.
If a party makes payments towards the university then either they are paying for themselves, in which case they themselves will be entitled to the services of the university or they are paying for someone else. In your scenario they are not paying for themselves as their objective is to just be a financier, rather they are paying for someone else. If they expect the student to pay them back then the arrangement will be classed as a loan and they will not be permitted to take anything beyond what they had initially given to the student.
Ifta Research Fellow
Checked & Approved by:
Mufti Abdul Rahman Mangera
Mufti Zubair Patel