Deposit

Bismillah. One of the types of transactions that’s very common today is a down-deposit transaction. This happens all the time with somewhat large purchases, like wedding cakes, or cars. Say your sister is getting married. You go to the bakery to locate a nice cake; passing by towers of icing, you locate one that doesn’t seem too unhealthy. “That one?” the shopkeeper says. “That one is $200. There’s a non-refundable deposit of $50 on it.

One of the ways in which Islamic finance differs greatly from conventional law is in the debt-for-debt transaction. In Islamic finance, a debt-for-debt transaction is not allowed. And this is one of the big factors in the current economic depression–people selling a debt for a debt for a debt for … one report says that America is built on debt seven times over! The guy at the bottom finally asks for his commodity, and all the people in the chain realize there was nothing there at all; it’s all debt on debt.