Insights · Explainer · for financiers, suppliers and distributors
Shariah-compliant dealer finance: how a deferred-payment sale differs from a facility
Stock finance through a purchase and resale rather than an advance of money. What changes, and what a distributor still owes.
Mtaji Insights
Published 31 October 2026. 2 min read.
Written by the Mtaji Insights desk and checked against Mtaji’s product terms and publication rules before release. Editorial standards
In brief
- The financier buys identified goods and sells them to the distributor at cost plus a fixed, disclosed profit, payable later.
- There is no interest and the price never grows, but the distributor still owes it in full, and paying late has costs.
- Only a financier with its own Shariah approval can offer it. Mtaji certifies nothing about Shariah compliance.
Some distributors want stock finance that charges no interest. Shariah-compliant dealer finance meets that need through a sale rather than an advance of money. It sits on the anchor’s sales side, where distributors buy stock; suppliers selling to the anchor use different structures. The differences from a conventional facility are real, and so are the obligations.
A purchase and a resale, not an advance
The financier buys identified goods from the anchor, owns them, and sells them to the distributor at cost plus a profit that is fixed and disclosed before the distributor commits. The distributor pays that price on deferred terms. It finances real goods, consignment by consignment, rather than working capital in general.
Distributor finance, by contrast, is a credit facility to the distributor, with recourse to the distributor, repaid on the agreed date whether or not the stock has sold.
Three agreements make one facility
A program agreement between the financier and the anchor gives the financier the right to buy goods from the anchor; the distributor is not a party to it. An agency agreement appoints the distributor as the financier’s agent to receive and hold the goods the financier has bought. A sale agreement, signed afresh for every consignment, sells those goods to the distributor at the agreed price.
Who owns the goods, and when
The distributor first gives a binding promise to buy the goods at the disclosed price. The financier then buys them from the anchor, and ownership and risk pass to the financier. The distributor takes delivery as the financier’s agent and holds them as custodian, unable to sell, pledge or move them. Title and risk pass to the distributor when it takes physical possession of the goods in its own right. From that moment it insures them, and its obligation to pay begins.
What it costs, and what lateness costs
No interest is charged. The price is cost plus a fixed profit, and it does not grow with time or rise if payment is late. The distributor still owes that price and has to pay it in full on the agreed date. If it pays late, the financier may recover its actual, documented costs of the delay, and the distributor pays a separate charity sum on the overdue amount, which is not the financier’s income. Paying early carries no penalty; any rebate is at the financier’s discretion.
Security is taken, and it is registered before the goods are delivered.
Who can offer it
The structure needs a financier with an Islamic window or equivalent, and Shariah approval is the financier’s own, from its own board. A financier without one cannot run the program. Mtaji operates the platform and certifies nothing about Shariah compliance.