Bai' al-Inah

A financing technique where a seller sells an asset to a buyer on deferred payment terms, then immediately repurchases it from the buyer for a lower cash price. The net effect provides the buyer with immediate cash and a deferred obligation — similar to a loan with interest.

Widely used in Malaysian Islamic finance but considered impermissible by most Middle Eastern scholars and AAOIFI, who view it as a legal device (hilah) to circumvent the prohibition on riba.

Bai' al-Inah is a sale-and-buyback: you sell an asset to a financier for cash today and immediately buy it back at a higher deferred price — economically identical to an interest-bearing loan, with the asset serving as a fig leaf. It is the sharpest dividing line in Islamic finance geography.

Malaysian scholars historically permitted it (and built early Islamic credit products on it), while GCC scholars and AAOIFI reject it because the two sales are a transparent device (hilah) to produce riba; AAOIFI's standards prohibit structures whose only purpose is cash-for-more-cash. Even Malaysia has been migrating away from Inah toward commodity Murabaha (Tawarruq) since the 2010s.

For U.S. consumers the term matters as a due-diligence tool: no credible American halal provider uses Bai' al-Inah, but its logic — inserting a token asset into what is functionally a loan — is the exact criticism leveled at poorly executed Murabaha and Tawarruq programs. When evaluating any halal financing offer, the Inah test is useful: does the financed asset genuinely change hands with real ownership risk, or does it exist only on paper to justify a markup? If the latter, most scholars would treat the product as riba in costume.