Bay' al-Dayn

The sale of a debt or receivable to a third party. Because a debt is money owed, selling it for a different amount of money is an exchange of money for money with a difference, which most scholars treat as riba.

The majority (and AAOIFI) permit transferring a debt only at face value; Malaysian scholars have historically allowed discounted sale of trade receivables. The ruling matters for invoice factoring, the secondary market in financing contracts, and any fund that holds debt instruments, including conventional bonds and Murabaha receivables.

Bay' al-Dayn is the rule behind three practical questions American Muslims ask. First, invoice factoring: a factor that buys your $10,000 receivable for $9,600 has bought a debt at a discount, which the majority of scholars do not permit; compliant alternatives structure the arrangement as agency (the factor collects for a fee) or as a sale of the underlying goods.

Second, Sukuk and halal fixed-income funds: once a Murabaha contract is signed, what remains is a debt, so a fund made of Murabaha receivables cannot be traded above or below par under the majority view, which is why tradable Sukuk are built on leases and partnerships that represent assets rather than debts. Third, the secondary mortgage market: when U.S. halal home financing providers sell their contracts to Freddie Mac or Fannie Mae, scholars have accepted the structures because what is transferred includes the ownership interest in the property, not a bare debt.

When you evaluate a 'halal bond' or a receivables-backed product, ask what the certificate represents; if the answer is only money owed, most scholars will say it can be held to maturity but not traded for a gain.