Is It Permissible for a School to Offer Discounted Tuition for a Lump Sum While Charging the Full Amount for Monthly Installments?
Answered by Shaykh Muhammad Carr
Question
Is it permissible for a school to offer discounted tuition for lump-sum or two-part payments while charging the full amount for those who opt for monthly installments?
ِAnswer
Thank you for your question. May Allah reward you.
Allah Most High says, “O believers! Do not forbid the good things Allah has made lawful for you, and do not transgress. Indeed, Allah does not like transgressors.”
[Quran, 5:87]
A school may offer a discounted price for cash payments that are lower than the total monthly installments.
Charging a higher credit price is permissible because it falls outside the ambit of riba. Riba is defined as a contract involving the exchange of usurious compensation on both sides of the contractual equation under any of the following conditions:
- The equivalence of the exchanged items, according to Islamic Law, is indeterminate at the time of the contract.
- The payment of both the price and its corresponding value is deferred; or
- The payment of one of them is deferred. [Bayjuri, Hashiya]
The service level agreement clearly falls outside the ambit of Riba due to the absence of usurious elements on both sides of the transaction. Consequently, the restrictions associated with Riba do not apply, allowing the contracting parties the freedom to agree on any mutually acceptable price.
Moreover, this transaction should not be construed as two contracts in one since the purchaser opts for either the cash contract or the credit contract. The contract is then executed according to his chosen option.
I pray this is of benefit, and Allah guides us all.
[Shaykh] Muhammad Carr
Checked and Approved by Shaykh Faraz Rabbani
Shaykh Muhammad Carr has dedicated his life to studying and transmitting our beautiful deen. His studies have taken him around the globe, where he has benefitted from many luminaries. Under the guidance of his teachers – Shaykh Taha Karan, Shaykh Yaseen Abbas, Shaykh Muadh Ali, and many others – Shaykh Muhammad has grown to appreciate the beauty and benefits of diverse scholarship. He completed his memorization of the Qur’an at Dar al-Ulum Zakariyyah in September 1997 and received an Alimiyya Degree in 2006 from DUAI (Darul Ulum al-Arabiyyah al-Islamiyyah). He is also affiliated with Masjid Auwal in Bo Kaap, Cape Town (the oldest mosque in South Africa), where he serves as a co-imam, and Dar Al-Safa, where he has taught since 2018. As a teacher, he imparts the wisdom of our heritage and tradition by opening the door for students. As an imam, he has the unique opportunity to serve his community in daily life.
In addition to his roles as a teacher and imam, Shaykh Muhammad Carr has contributed significantly to the administrative and advisory aspects of Islamic institutions. Since 2023, he has served as the Administrative Director at The Imam Kurani Institute, contributing to the institution’s growth and development. He continues to pursue traditional Islamic Sciences, possessing a keen interest in Islamic Contract Law and Finance. Shaykh Muhammad has been a Shari’ah Board Member for Islamic Asset Management & Insurance Companies since 2001, aligning financial practices with Islamic principles.
