I was wondering if Invoice Factoring can be considered a halal/shariah compliant business?
Basically if a company has filled a large order to a customer, with 60-90 day payment/credit terms.
The company gets a 2nd large order, but does not have enough cash-flow to fill it.
I would buy the value of the invoice, paying the company 85% of the invoice value.
When the customer pays me the 100%, I deduct my 10% fee, and forward the remainder to the company.
If the customer does not pay inthe agreed time, the company has to payback my money.

I wish to know if this is a halal business?
Of course I am only asking about factoring invoices for halal/muslim companies, ie. clothing manufacturing, IT resellers etc.


Tue, 2012/09/04 - 03:00


Below is my viewpoint.
You can't sell your debt at different amount. e.g selling debt of amount 1,000 at 800 is actually ribba. In above scnerio sale of debt is not actually taken place. You are just providing the service for recovering the debt. Becaue if u fail to recover the debt, compny will pay u your advance. Fee charged should represent your actuall cost incurred for this activity.

This viewpoint may be wrong.So, plz don't make it reason for your decission.