Shariah compliance of Islamic credit cards reconsidered : a case study of Malaysia
Author
Ibn Abd al-Razzaq, Shahrul Azman
Source
ISRA International Journal of Islamic Finance
Issue
Vol. 7, Issue 1 (30 Jun. 2015), pp.75-96, 22 p.
Publisher
International Shari'ah Research Academy for Islamic Finance
Publication Date
2015-06-30
Country of Publication
Malaysia
No. of Pages
22
Main Subjects
Economy and Commerce
Financial and Accounting Sciences
Religion
Law
Islamic Studies
Topics
- Islamic jurisprudence
- Islamic economics
- Islamic law
- Financial transactions
- Contracts
- ٌLeasing
- Loans
- Case studies
- Malaysia
- Bail
- Credit operation
- Resale on profit
- Tawarruq
- Warranty
- Credit cards
- Islamic Banks
Abstract EN
Many structures have been proposed by Islamic banks in Malaysia for Islamic credit cards including murabah (sale with mark-up), bayʿ al-Inah (sale and immediate buy-back) and tawarruq (tripartite sale).
However, recently, some Islamic financial institutions have employed the contracts of ijarah (leasing), ujrah (fee) and musharakah mutanaqiṣah (diminishing partnership) as an alternative for structuring Islamic credit cards.
This paper aims to examine a new structure for an Islamic credit card offered by an Islamic bank in Malaysia using the contract of ujrah and kafalah bi al-ujr (guarantee with fee).
This paper is qualitative in nature and employs a case study to examine the Shariah issues arising from this structure.
Based on the case study presented, the paper finds that the structure combines three contracts-namely, qarÌ (loan), kafalah (guarantee) and ujr (fee).
The Shariah issues relate to the monthly management charges, cash withdrawal management charges and the combination of sale and loan contracts.
It is observed that the actual monthly management charges (AMMCs) and actual cash withdrawal management charges (ACWMCs) are comparable to riba al-qarÌ since the bank imposes fees tied to the amount of outstanding balance.
Meanwhile, the issue of combination of contracts arises as the product combines qarÌ (non-exchange contract) with kafalah bi al-ujr (exchange contract) in one deal.
This combination was prohibited by the Prophet (SAW) as it has been used as a method for circumventing the prohibibion of riba (interest).
This study proposes that the bank may retain the fixed monthly management charges (FMMCs) and fixed monthly cash withdrawal charges (FMCWCs), but it has to eliminate the AMMCs and ACWMCs as they amount to riba.
In order to resolve the controversial issue of combining exchange and non-exchange contracts, it is proposed that the contract of kafalah bi al-ujr be replaced with the concept of takāful (Islamic insurance).
Thus, with some improvements and modifications required in the structure of the Islamic credit card examined, this paper looks into ways of maintaining the Shariʿah compliance of the product
American Psychological Association (APA)
Ibn Abd al-Razzaq, Shahrul Azman. 2015. Shariah compliance of Islamic credit cards reconsidered : a case study of Malaysia. ISRA International Journal of Islamic Finance،Vol. 7, no. 1, pp.75-96.
https://search.emarefa.net/detail/BIM-717704
Modern Language Association (MLA)
Ibn Abd al-Razzaq, Shahrul Azman. Shariah compliance of Islamic credit cards reconsidered : a case study of Malaysia. ISRA International Journal of Islamic Finance Vol. 7, no. 1 (Jun. 2015), pp.75-96.
https://search.emarefa.net/detail/BIM-717704
American Medical Association (AMA)
Ibn Abd al-Razzaq, Shahrul Azman. Shariah compliance of Islamic credit cards reconsidered : a case study of Malaysia. ISRA International Journal of Islamic Finance. 2015. Vol. 7, no. 1, pp.75-96.
https://search.emarefa.net/detail/BIM-717704
Data Type
Journal Articles
Language
English
Notes
Includes bibliographical references : p. 94-96
Record ID
BIM-717704