Why is Installment Purchase so Common in the Muslim World? As-salam-a-laikum, Is it legal from the point of view of the Shari`ah to buy things on installments? What happens is that on buying, the buyer pays a down payment (40-50% of the total) to a third party. The third party then pays in full for the thing and the buyer must pay the third party back within a specified period. However, the third party levies interest on the money depending on the time during which it must be paid back. Is this interest the same as that denounced in the Qur'an? If so why does such a large portion of the Muslim world practice it? Are there any scholarly disputes about this? Reply For my opinion on installment purchase please refer to my response to an earlier question . As far as your question as to "why does such a large portion of the Muslim world practice it" is concerned, the reason for this practice seems to be twofold. Firstly, it seems that the Muslim states have not been able to find a feasible alternative to interest-based modes of financing; and secondly there is some difference among Muslim scholars regarding the definition of Riba , which was prohibited by the Qur'an. Some scholars hold that the prohibition of the Qur'an relates only to Riba loans taken for personal, as opposed to commercial use. Some scholars hold that the Qur'an only prohibits Riba when it is charged at exorbitant rates etc. Moreover, as far as charging more on sale on installment basis is concerned, some scholars hold that because it is the right of the seller to charge any amount for the sale of his item and he may sell his item at a higher or a lower price to a particular buyer, therefore we cannot prohibit him from selling his item at a higher price to a buyer, who wants to pay the amount in installments. I have given my point of view regarding the definition and implication of Riba in my response to the questions asked in this respect by the Supreme Court of Pakistan ( 1 , 2 ). As far as the reasoning given by the scholars in allowing an incremental price in installment purchase is concerned, I think it is completely false. I do agree that it is the prerogative of the seller to charge any price for his item, but the directive of the Qur'an, which prohibits Riba has actually limited this prerogative also. Now, although the seller can charge any price for his item, he cannot charge an incremental price for allowing buyer time to the buyer for making the payment, as this increment would come under the scope of Riba , which is prohibited by the Qur'an. I hope this helps. In case any aspect remains unclear, please feel free in writing back to me at your convenience. May Allah grant us all true understanding of His guidance. Regards The Learner