Concept & Application of Baiʻ al-Īnah in Islamic Banking in Indonesia and Malaysia

ABSTRACT


INTRODUCTION
Baiʻ al-īnah, or known in Bahasa Indonesia as 'inah transaction, is used as a term that indicates the occurrence of two sales and purchases of the same item, but carried out at different prices, the cash price for the first sale and purchase and installments for the second sale and purchase. The Islamic economy forbids three principles to be carried out Varia Justicia 81 Vol. 16 No. 2 (2020) in the business activities of Islamic financial institutions, maysir, gharar, riba (shortened as maghrib in Bahasa Indonesia).
According to Nik Norzrul Thani, "Maysir is gambling in terms of a true form of speculation." 1 Meanwhile, gharar means vague (jahalah), unclear or uncertain from the objects, contracts, or price. 2 As for usury, M. Umer Chapra defined it as the addition in one or two exchanged homogeneous equivalents is without return. He stated, "Riba literally means 'increase' (al-ziyadah), and terminologically it is defined as an increase in one of two homogeneous equivalents being exchanged without return." 3 Based on these forbidden principles, several related terms were born, such as baiʻ al-īnah, bai' at-tawarruq, and bai' ataani fi bai'ah wahidah. The terms baiʻ al-īnah consist of bai', which means to buy, and al-inah is derived from al-ain, meaning goods (dzat) and cash. 4 The trading transaction is called an 'inah transaction because: 5 1. Goods (al-ain/dzat) are objects that become objects of sale and purchase back to the first seller. 2. Al-ain means cash, where the buyer receives cash in exchange for resold goods to the first seller. From its terminology, baiʻ al-īnah is a sale and purchase contract where the seller sells an item to another person in cash, and then the seller repurchases the item in installments at a higher price. Engku Rabiah Adawiyah stated that: baiʻ al-īnah is known by "sale to cash" or "sale and buy back" or "same item sales." 6 Engku Rabiah Adawiyah defines baiʻ al-īnah as cash sales, sale and buyback, repurchase, or comparable goods sale.
Agus Triyanta, in his dissertation theses, illustrated al-inah contract as follows. A person sells goods to other people at a specific price where the payment is delayed for a period. He repurchases the goods in cash at a lower price, and the owner gets a profit from the price difference between the first and second contracts. 7 Baiʻ al-īnah becomes a fascinating topic in Indonesia and the world since this issue is closely related to the halal business development that operates according to sharia. Justicia Vol. 16 No. 2 (2020) The concept of baiʻ al-īnah and its application in Islamic financial institutions (sharia) in Indonesia and Malaysia still becomes a polemic that has sparked debate, both among Islamic economists and practitioners in Islamic financial institutions at the national and international levels.

Varia
An example of this disagreement is, for example, Al-Zuhaeli argues that baiʻ alīnah as "The entire operation is a trick to borrow with interest (riba) disguised as purchases and sales." 8 Zuhaeli believes that the entire baiʻ al-īnah processes are tricks or manipulations to borrow money accompanied by interest or usury disguised as buying and selling transactions. Meanwhile, Imam al-Syafi'i, known as one of the most outstanding Islam scholars, argued that bai' al-īnah could be applied to Islamic economic transactions with several points to be considered.
Malaysia is an example of a country that has implemented baiʻ al-īnah in various types of transactions operated by several Islamic financial institutions (IFIs), despite some changes in regulations or policies that affect its implementation. Meanwhile, Indonesia still prohibits applying the practice of financing in Islamic Financial Institutions (LKS) because it is considered to contain usury. Related to the above explanation, baiʻ al-īnah is a fascinating subject, both in terms of the concept that brings polemics and why in Islamic economics, Indonesia and Malaysia are two countries with many similarities. Both countries are predominantly Muslim, and in terms of Islamic economic development, the two countries also have relatively similar dynamics. In this regard, a discussion of the concept of baiʻ al-īnah and comparing its application in Indonesia and Malaysia is an excellent comparative study. This paper wants to show that the two countries, predominantly Muslim, have different policies in implementing bai alinah. However, these differences must be respected because each is based on the ulama's ijtihad, which can guide).

RESEARCH METHOD
This legal research used normative (doctrinal) methods, research on legal concepts developed based on the doctrines adopted by thinkers or developers in related fields. The approaches of the study were the regulatory (statute approach) and the conceptual approach. The data in this paper focused on secondary data in the form of primary legal materials taken from various regulations related to the application of baiʻ al-īnah in Indonesia and Malaysia. Consequently, the research also used secondary legal materials in the form of experts' doctrine in Islamic economics and using tertiary legal material from the dictionary to support primary and secondary legal materials. Vol. 16 No. 2 (2020)

The Concept of Baiʻ Al-Īnah
In the dictionary, al-inah is translated as a loan. Al-inah is derived from the word 'ayyana, which means doing 'inah or debt, using a merchant selling goods at a delayed price, then repurchasing them in cash at a lower price. 9 Baiʻ al-īnah, from the perspective of fiqh science, is defined as manipulative buying and selling, which is often used as an excuse for borrowing money for then to be paid more than the initial amount. Specifically, it is done by selling goods with delayed payment, then repurchasing them in cash at a lower price. 10 Ayub argued that 'inah transaction (baiʻ al-īnah) is a trading practice in which the buyer buys the goods from the seller at a credit-predetermined price and then the buyer resells the goods to the original seller at a lower price than the previous purchase price. 11 Baiʻ al-īnah in Islamic financial institutions can be illustrated as follows: Financial institution 'A' sells a car to someone for IDR 200,000,000 (two hundred million) in installments (credit). It was then agreed that the price would be paid within eight months so that every month the debtor had to pay installments on the car's price for IDR 25,000,000 (twenty-five million). Furthermore, at the same time, the debtor resells the car back to the financial institution 'A' for IDR 120,000,000 (one hundred and twenty million rupiahs) in cash, which means that the car's owner returns to the financial institution 'A.' This phenomenon occurs because the person needs cash instead of a car. The debtor gets cash from the financial institution 'A' amounting to IDR 120 million through this transaction. However, at the same time, the person is obliged to pay installments to the financial institution 'A' for IDR 200 million, which had to be paid in installments within eight months.
Meanwhile, financial institutions 'A' got a profit of IDR 80 million due to the price difference between the first and second purchase through installments. Why did Fulanah and financial institution 'A' not use debit transactions? The answer is because Islam strictly regulates debt transactions that it is forbidden to take profit in any form of debt. Debit transactions must be done solely with pure and kind intentions (qordhun hasan). Burdening the debtor with a specific addition when returning it, regardless of the amount, is the same as a credit agreement with a conventional financial institution. The additional money becomes usury.  Vol. 16 No. 2 (2020) According to Ibn Taimiyah, trading in the view of Islam is categorized into three types, (1) A person buys goods to consume them, and this is allowed. (2) A person who buys goods to be resold is also okay because there is no prohibition against buying and selling (business), (3) A person buys goods, not for consumption and business purposes, but to get cash. Since getting cash is very difficult, that person buys goods at a high price and then sells them back to the original seller at a lower price. 12 The third type is baiʻ alīnah, and its law is still debated.
Abdullah Ibn Muhammad Ibn Abdullah al-Imrani emphasized that al-inah transaction is two contracts with two different prices, the cash price and the delayed price for the same item. 13 Based on the description above, 'inah transaction has the following five characteristics: 1. There are two buying and selling agreements. 2. Buying and selling twice is done on specific terms. The second sale and purchase are carried out because there are conditions in the first sale and purchase that the buyer is willing to buy. After all, the seller is willing to rebuy it. 3. There are two legal roles of sellers and buyers. Because the sale and purchase are carried out twice, the seller in the first sale and purchase becomes the buyer for the second sale and purchase. Conversely, the buyer in the first sale and purchase changes the seller's role in the second sale and purchase. 4. There are two prices. In the first sale and purchase, a cash price applies, and in the second, a delayed price applies, which is generally higher than the cash price. 5. The transactions are done twice for the same item.
'Inah transaction is prohibited by most ulama because it is considered part of the ribawiyah hilah. Most ulama argue that the actual contract or transaction is not about buying and selling goods but borrowing money in exchange for profit. Whereas in the lending and borrowing transaction (qardh) it is prohibited to be accompanied by profits in any form. Agreed addition upon in qardh is categorized as riba. Therefore, in the view of jumhur ulama, traded goods are only used as media so that formally the seller gets a profit, which is not profit, but riba in the form of additional money.
Abu Hanifah stated that although, in general, the validity of buying and selling was determined by the language of the contract, he prohibited baiʻ al-īnah. Abu Hanifah also argued that if someone sells something on credit and then the buyer sells it back to him in cash, then the second sale and purchase is invalid. Abu Hanifah believes that the price of credit on the first sale and purchase is not acceptable, so the second sale and purchase are unacceptable. 16 Maliki and Hambali's schools also rejected baiʻ al-īnah and considered it illegal to buy and sell by using this model. Both of them considered that the baiʻ al-īnah agreements are null. Their opinions are based on the principle of sadd aż-żrīʻah, which is about the goal of preventing practices that can lead to prohibited actions such as riba. Malikiah and Hanabilah Ulama even forbid buying and selling using 'inah, based on the argument in the form of the Hadith of the Prophet Muhammad, which states that "there will come to humanity one day, which legalizes riba by buying and selling. Yusuf Qardhawi emphasized that what is meant by buying and selling in the Hadith is buying and selling 'inah. 17 Wahbah Al-Zuhayli also stated that the 'inah sale and purchase contract was only a hilah leading to a loan agreement that contained riba by sale and purchase contract. 18 In principle, baiʻ al-īnah is part of the prohibition of two buying and selling in one sale and purchase. Conceptually, scholars relate the 'inah transactions with the concept of bai ataani fi baiah wahidah (two buying and selling in one sale). Most ulama place the buying and selling of 'inah to hilah (hilah ribawiyah) in the process.  Vol. 16 No. 2 (2020) Hilah is an effort or specific methods used by a person to abort an obligation or make an effort to make something haram becomes halal, using methods that, in the end, what is obligatory become non-obligatory or that which haram may become halal. 19 Imam Ibn Taymiyyah and Ibn Qayyim al-Jauziyyah also explained that the substance of the prohibition of two buying and selling in one sale and purchase is essentially the prohibition of buying and selling 'inah (baiʻ al-īnah), i.e., someone selling their belongings to another party at a specific price in cash. After that, the buyer is required to sell it back to the first seller at a higher price, which is delayed paid (ta'jil) or in installments (taqsith). 20 Likewise, Ibn Rushd stated that among the Hadith's intentions concerning the prohibition of two buying and selling in one transaction (bai' ataani fi bai'ah wahidah) is 'inah transaction.
Meanwhile, according to Al-Syathibi, the goods which are used as the object of sale and purchase at baiʻ al-īnah are a means of playing or buying and selling done artificially (fake) because the benefit of the sale and purchase in terms of the objective is the transfer of ownership of the goods, not achieved. 21 Nazih Hammad 22 argued that from the aspect of the purpose of the contract, the buying and selling of 'inah is hilah ribawi (riba as a result of a manipulation), which is prohibited because the transaction acts only as a disguise of the foul intentions. The substance of the contract is qardh (borrowing money), while it appears as a trading transaction, and the goal is to profit from qardh. Many parties view baiʻ al-īnah as a form of engineering to take riba is an economic transaction, even though it is strictly forbidden in Islam.
However, al-Syafi'i and Zahiri schools allow baiʻ al-īnah. The Syafi'i and Zahiri schools state that a contract must be assessed based on what is expressed or seen outwardly. They criticized the hadiths used by most Islamic scholars as to the basis for their arguments and said that the hadiths were weak, so they could not be used as a legal basis.
Syafi'i 23 states that the validity of the sale and purchase contract is seen physically. However, al-Syafi'i also punishes makruh on transactions that are accompanied by the intention to justify riba. If the intention is expressed, it will encourage other parties to cancel the sale and purchase. 19 Muhammad Khalid Mas'ud, Islamic Legal Fhilosofhy: A Study of Abu Ishaq Al-Dhatibi's (Islamabad: Islamic Research Institute, 1977). 20 Ibn Qayyim al-Jauziyah, I'lam Al-Muwaqqi'in An Rabb Al-Alamin (Beirut: Dar al-Fikr, 1995 Syafi'i, Al-Umm (Beirut: Dar al-Mar'ifah, 1990). Vol. 16 No. 2 (2020) Responding to the above views, Azwar dan Muhamed 24 said that it is true that some Muslim scholars in Southeast Asia argue that Syafi''i allows baiʻ al-īnah and therefore baiʻ al-īnah can be applied to areas inhabited by followers of the Syafi'i school. However, both also argue that there are many questions about this opinion. Is it true that Syafi 'i allows a form of buying and selling in which there is an engineering element (hilah) to justify riba? Or is it Syafi'i when talking about baiʻ al-īnah differently from what many people understand? Some parties have doubted the opinion of Syafi 'i to allow baiʻ al-īnah in the context of hilah. As proposed by Rosly & Sanusi 25 and Ahmad 26 , they claimed that there is no satisfactory evidence to state that Syafi'i allows baiʻ al-īnah in the context of containing hilah.
The view of Syafi'i can be examined from his response to one of the hadiths of the Prophet related to Zaid ibn Arqam, as described above. Concerning this Hadith, Syafi'i has a different opinion from Aihya. According to Syafi'i, the sale and purchase carried out by Zaid ibn Arqam, as explained in the Hadith, can be justified based on qiyas that the sale and purchase made by Zaid ibn Arqam are following the trading allowed in the Qur'an. Meanwhile, as the source of Islamic law, Al-Qur'an has the highest level of authority, especially compared to the Hadith, which, according to Syafi'i, may lead to different interpretations. 27 Therefore, Syafi'i saw that Aisha's reproach for buying and selling to Zaid ibn Arqam was due to the incomplete information that Aisha received.
Syafi'i doubts that what Aisha is criticizing is two different prices between cash prices and delayed prices. According to him, what Aisha criticized was that she did not know the time frame for the delayed buying and selling transaction made by Zaid to al-Atha. In this context, Syafi'i emphasizes the importance of clarity of the contract in a sale and purchase transaction. It is okay if Zaid sells something to Atha firmly as long as with an apparent/known timeframe based on qiyas. 28 Syafi'i views that it is impossible for Zaid ibn Arqam, a Prophet friend, to have made an illegal transaction. Zaid ibn Arqam is known as a Prophet's companion who has participated in jihad with the Prophet, 17 times out of 19 jihad carried out by Rasulullah SAW. 29 Zaid ibn Arqam besides being known as a person who has extensive knowledge 24 Abdul Azaheem Ahmed Azwar and Nurul Aini Muhamed, "Islamic House Financing Products in Malaysia: Shari'ah Issues and Possible Causes," in Paper Proceeding of the 5th Islamic Economics System Conference 2013, 2013, 1196-1208. 25 Muslim, Sahih Muslim Vol. 7, Musaqah, 2007. 88 Varia Justicia Vol. 16 No. 2 (2020 of trading and riba, has also been a reference for many other friends who ask about trading and riba. 30 Syafi'i's thought is different from the views of Abu Hanifah, Imam Malik, and Ahmad ibn Hanbal. Abu Hanifah adhered to Aisha's opinion in the Hadith because, according to Abu Hanifah, delayed trading was illegal, so the second transaction was invalid. Meanwhile, Imam Malik and Ahmad ibn Hanbal adhere to sadd aż-żrīʻah in prohibiting the transaction. 31 Then regarding the accusation of hilah or fabrication of riba in the Hadith, al-Syafi'i stated that he did not see any manipulation because, in the first contract, a transaction had indeed occurred. According to Syafi'i, the sale and purchase occur when a handover has been made between the buyer and the seller. With the handover, there is a transfer of ownership of the goods being traded from the seller to the buyer. Furthermore, the buyer as the owner of the goods, of course, has the right to sell his belongings to anyone, including to the original seller, and at any price. Syafi'i also argues that delayed transaction (bai' ajal) in Islam is permissible, and not baiʻ al-īnah. 32 Apart from the hadiths stated above, the Prophet also prohibited baiʻ al-īnah through several other traditions, for example, the Hadith narrated by Imam Ahmad from Ibn Umar which stated that the Prophet said: "If people withhold (hoard) dinars and dirham and trade according to al-eena (a type of trade which is similar to riba) and they follow the tails of the cows and leave the Jihad in the Path of Allah, Allah places upon them humiliation which will not be raised from them until they return to their deen." 33 In the Hadith of Abu Daud, the Prophet also said, "If you do 'inah transactions to buy oxen, do "muzara'ah" and leave jihad, then Allah will bring humiliation to you. The humiliation will not be removed from you so that you will return to your religion." The next Hadith is the Hadith narrated by Ibn Abbas that he was once asked about a person who sold a piece of silk to another person in delay for one hundred dirhams, then he repurchased it for 50 dirhams in cash. Ibn Abbas replied, "That means selling dirhams with dirhams accompanied by flowers, but the mediator is a piece of silk." Furthermore, in the Hadith narrated by Anas bin Malik when asked about baiʻ al-īnah, where silk is the mediator, he replied, "Verily Allah cannot be deceived. That includes actions that Allah and His Messenger forbid." 34 Muhamad Khalid Mansur and Nazih Hammad delivered harsh criticism of baiʻ al-īnah by emphasizing several explanations as follows: 35 30 Muslim. 31 Muhammad Farid, "Murabahah Dalam Perspektif Fikih Empat Mazhab," Epistemé: Jurnal Pengembangan Ilmu Keislaman 8, no. 1 (2013): 113-34, https://doi.org/10.21274/epis.2013 Syafi'i, Al-Umm. 33 "Agustianto, Materi Pelatihan, Pembiayaan Multiguna, 14 February 2018" (Yogyakarta, 2018. 34 "Agustianto, Materi Pelatihan, Pembiayaan Multiguna, 14 February 2018." 35 Muhammad Khalid Manshur," Vol. 16 No. 2 (2020 "The bank sells its asset to the client (on credit), whom immediately sells back the same to the bank (on a case basis) and obtains the sum that he seeks. Baiʻ al-īnah only involves two parties while commodity murabahah involves more than two." According to Nidal, baiʻ al-īnah occurs when a bank sells assets to a customer (on credit), the customer immediately sells it back to the same bank and gets the amount of money he needs. Baiʻ al-īnah only involves two parties, while the tawarruq involves more than two parties.

The Applications of Baiʻ Al-Īnah in Islamic Banking in Indonesia & Malaysia
The National Sharia Council of the Indonesian Ulema Council (DSN MUI) does not have a specific fatwa regarding the sale and purchase of 'inah. However, based on the MUI DSN Fatwa Number 31/DSN-MUI/VI/2002 concerning Debt Transfer, it can be understood that the DSN MUI attitude towards baiʻ al-īnah. The fatwa emphasizes that 'inah transactions are only allowed in the context of transferring customer debts from Conventional Financial Institutions (LKK) to Sharia Financial Institutions (LKS), because there is an urgent need (al-hajah) to carry out the contract. In this case, the argument is that the sin of the ribawi agreement at LKK is more decadent than doing 'inah transactions. Thus, it is treated as an emergency solution based on the rule of alakhdz bi akhlaf al-dhararain (doing less sinful actions).
Based on the DSN fatwa, it can be inferred that 'inah transactions apart from transferring debt from LKK to LKS is forbidden.
However, in Indonesia, it is suspected that a similar transaction model has been carried out with baiʻ al-īnah in gold-based financing. In one of the Baitul Maal wa at Tanwil (BMT) in Yogyakarta, the customer may apply for murabahah financing (buying and selling) by buying gold from BMT with installment, and then the customer can sell the gold back to BMT or other parties by cash at a lower price. This case can be categorized as an 'inah transaction since the gold that has been purchased under the murabahah scheme in installment is then sold back to the BMT or other parties. The purpose of reselling it is to get cash. 40 Such a case contradicts the state policies that reject the application of baiʻ al-īnah in Sharia Financial Institutions. Thus, the institution authorized to carry out supervision needs to straighten out and maintain consistency in the prohibition of enacting the baiʻ al-īnah in Indonesia.
In comparison, the Malaysian Financial Authority allows baiʻ al-īnah to be used in the practice of Islamic financial institutions based on the opinion of Imam al-Syafi'i. The Council of SAC Malaysia, in its eighth meeting held on December 12, 1998(23 92 Varia Justicia Vol. 16 No. 2 (2020 2. The basis for justifying baiʻ al-īnah is the same as the basis for the justification of obtaining bai' tawarruq. Hence, the two concepts must be arranged in the same way 3. The concept of baiʻ al-īnah is still needed in the context of local Islamic finance development. However, market players are required to strengthen and improve operational processes and documentation to match the permitted characteristics of baiʻ al-īnah, and Since the concept of baiʻ al-īnah is still debatable among sharia scholars, it is recommended that Islamic financial institutions limit its use in structurally challenging products and based on other contracts that can be accepted consensually. 42

CONCLUSION
Based on the above discussions, the following conclusions can be drawn. First, baiʻal-īnah is a practice of buying and selling carried out by a seller to a buyer on a credit basis, and then the buyer resells the goods to the original seller at a higher price. Second, scholars have different opinions about baiʻ al-īnah. Abu Hanifah forbade baiʻal-īnah because he believed that the legally binding sale and the purchase were illegal, so the second sale and purchase were also invalid. Also, Imam Malik and Ahmad ibn Hanbal prohibited baiʻal-īnah because they both adhered to the argument of sadd al-dharīʻah. After all, 'inah transaction contains elements of usury and manipulation to justify credit interest. In contrast, Imam al-Shafiʻī allowed 'inah transaction because buying and selling activities were lawful and based on qiyas, and the buying and selling of this model were in line with Al-Qur'an. However, Imam al-Syafi'i also forbade baiʻ al-īnah, which contains hilah/manipulative. Third, Indonesia prohibits baiʻ al-īnah from being applied to Islamic Financial Institutions (LKS), except for emergency reasons, which is baiʻ al-īnah to take over credit or transfer customer debts from conventional financial institutions (LKK) to Sharia Financial Institutions (LKS). As opposed to that, Malaysia allows baiʻ al-īnah to be applied to Islamic Financial Institutions by referring to the opinion of Imam Syafi'i. However, Malaysia has also evaluated the regulation and recommended that baiʻ al-īnah be implemented with caution. Bai' al-inah in Malaysia is practiced in several Islamic Financial Institutions' products, including sharia credit financing, home financing, gold transactions, and etc.