A merchant opened a letter of credit with one of the local banks, but when the commodity arrived at the port the customer could not afford to pay the bank for it. Is it permissible for KFH to purchase the goods back from the bank and then sell them to the same customer?
It is impermissible for KFH to purchase the goods from the bank (which is considered in this case to be an agent for the customer, authorized to sell the commodity that was mortgaged to ensure payment of its price) and sell it to the customer on a deferred basis. That is because the sale would be a kind of ‘inah. That is because purchasing the goods from the bank, which is an agent for the customer, is the same as purchasing them from the customer himself, and [KFH] will subsequently sell the goods back to the customer, which is bay‘ al-‘inah.
Kuwait Finance House