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a part of Islamic Banking

approved by Shariah Advisory Council Bank Negara Malaysia's Council as a financial instrument that complies with Islamic law (BNM)(Saad, 2014).

must not engage in any activity considered haram in Islam

The prohibition on gharar and riba is the main difference between Islamic and Conventional credit cards (CompareHero.my Team, 2019).

It contains a filtration mechanism to make sure the credit card is only used for halal transactions; it cannot be used to make gambles, buy alcohol, or engage in other non-Islamic activities.

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Islamic credit cards provide assurance that financial products are Shariah-compliant and adhere to Shariah principles for Muslims.

offer takaful coverage to the cardholder

convenient Zakat payment

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Worldwide - Bay' al-inah, tawarruq, hiwalah, murabahah, ijarah, and kafalah or wakalah.

Malaysia - Bay’al-inah, Tawarruq, and Ujrah

Bay’ al-Inah is a financing facility involves an agreement by the seller to sale and buyback an asset at a different price (Bank Rakyat, 2022).

Tawarruq is an agreement wherein products or assets are bought from a financier via a bargain sale or murabahah (cost plus profit) on a deferred payment basis. The cash is then obtained by selling the products or assets to a third party other than the original seller (Bank Rakyat, 2022).

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The Arabic word "ujrah" means "fee"

typically used expressly in reference to the costs associated with receiving services. (CompareHero.my Team, 2019)

Islamic banks use the Sharia concept of Ujrah, which is the payment of service fees in return for providing clients with services.

Instead of paying interest, cardholders are charged fees for the privileges, services, and benefits offered by Islamic banks.

In addition, cash advances are also offered, and certain Islamic banks provide both Islamic credit card services and cash advance services.

CIMB Islamic Mastercard and Maybank Ikhwan are two examples of Islamic credit cards that make use of this idea.

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Skywards Emirates Islamic Bank (EIB) was the first Islamic bank to introduce a Ujrah card. (Balarabe & Abdullah, 2020)

structured based on Sharia law and does not charge customers additional interest or cost mark-ups

The Ujrah Credit Card does not have variable interest rates like traditional banks; instead, costs are contingent on the balance, with just a fixed service fee assessed to the cardholder or customer. (Uddin et al., 2018)

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The ‘dha` wa ta`ajjal’ is unacceptable since it resembles the idea of riba.

The pre-agreed discounts are prohibited because they create gharar (Fairooz, 2016).

However the ‘dha’ wa ta’ajjal’ is acceptable since it releases the debtor from debt and waives part of the creditor's rights (Balarabe & Abdullah, 2020).

According to BNM (2010), the Shariah Advisory Council resolved that BNM shall give its customers rebate.

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There should be no penalties for late payments because the penalties are similar to riba.

However, the penalty can be paid in cash because it’s supported by the verses from the Quran where Hadith and the fiqh maxim have supported the penalty (Balarabe & Abdullah, 2020).

SAC determined that late settlement fees which incorporate the ideas of gharamah (penalty) and tawi'dah (compensation), are acceptable (BNM, 2010).

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Mr. A has applied for the Ujrah-based credit card from an Islamic bank that offered this product. In the Ujrah-based credit card, a yearly fee was associated with the card, which paid for the costs of card issuance and maintenance rather than assessing interest on unpaid amounts. The terms and conditions of the credit card were transparent, and Mr. A could easily understand the Ujrah fees associated with the card. The bank made it clear that the card was structured to be compliant with Islamic finance principles. At the end of each billing cycle, the bank calculated the Ujrah fee based on the services provided. After that, there were also no interest charges associated with the card, in line with Islamic finance principle. This eliminated any concerns about engaging in Riba (usury). The Ujrah-based credit card also offered benefits such as cashback rewards on specific purchases and discounts at participating merchants.

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B requests a credit card based on the Islamic finance concept of Tawarruq. In order to make sure B can make purchases within his means, the bank establishes his credit limit based on his financial profile and Islamic standards. In a Tawarruq transaction, the bank purchases a commodity on behalf of B after B notifies the bank of the intended purchase amount. In order to pay for B's purchase, the bank sells the commodity to a third party for cash. B consents to pay back the bank at a later time, on a plan that works with his budget. For enabling Tawarruq transactions, the bank may impose transparent fees, guaranteeing that financial transactions are understandable and in line with Islamic law.

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C applied for and was granted an Islamic credit card using the Bal al-Inah structure. He made the decision to use his credit card to make a transaction. Assume that he spends RM1,000 on a phone. For RM1,000, the bank buys the phone on C's behalf and then sells it back to him for a higher price. C consents to repay the bank for the laptop in installments. For example, the entire buyback price may be RM 1,200. The original purchase price plus a bank profit margin make up the buyback price. C pays the bank back over the predetermined amount of time in monthly installments.

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From Abdullah bin Abbas ra, he said that the Messenger of Allah, peace be upon him Shallallahu 'alaihi wasallam once cupped and gave wages to one cupping if he knows cupping is mahruh (not recommended) of course not giving wages.

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From Abu Hurairah radillallahu 'anhu said: That the Prophet saw 'alaihi wasallam said; Give wages to workers before their sweat dries up.

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From Abu Hurairah radillallahu 'anhu said: That the Messenger of Allah may Allah bless him and grant him peace said, whoever works for someone, then let him tell the wage rate.

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Credit cards that are based on Ujrah (fee) are acceptable according to Sharia law as long as there is no element of riba (interest).

The majority of Islamic jurists, including the International Islamic Shariah Academy (IIFA-OIC) of the Organisation of Islamic Cooperation, the Shari'ah Advisory Committee (SACBNM) of Bank Negara Malaysia, and the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI), agree that banks are permitted to charge certain fees, like participation, renewal, or replacement fees, but not riba (interest).

Let's say a bank or credit card company wants to use the Ujrah protocol to process Islamic credit cards. In that instance, the bank needs to guarantee that the costs are set and independent of the total amount owed.

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1. The Ujrah contract reveals to us that it can provide many benefits to both parties in a transaction, which can aid in the promotion of social cohesiveness and solidarity.

2. The Ujrah contract also shows that Islam also has a financial system that is systematic and fair to everyone, which is one way to help reduce poverty and inequality.

3. The Ujrah contract also shows that this contract is able to help the poor because it gives individuals access to financial assistance without the burden of excessive interest charges.

4. The concept of interest should be replaced with the concept of Ujrah in daily life because this contract is transparent and the rate is fixed in any transaction.

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Al-Bukhari, M. (1987). Sahih al-Bukhari. (M. Muhsin Khan, Trans.). Darussalam. https://sunnah.com/bukhari:684

Al-Bukhari, M. (1987). Sahih al-Bukhari. (M. Muhsin Khan, Trans.). Darussalam. https://sunnah.com/bukhari:1303

Balarabe, A. & Abdullah, M. F. (2020). The Islamic credit card based on Ujrah concept: Conceptual review. Journal of Emerging Economies and Islamic Research, 8(3), 74-83. https://doi.org/10.24191/jeeir.v8i3.9556.

Balarabe, A., Abdullah, M. F. (2022). Ujrah-based Islamic credit card: A Shariah-compliancy analysis. International Journal of Islamic Economics and Finanace Research, 5(1), 54-68. https://doi.org/10.53840/ijiefer69.

Bank Rakyat (2022). Shariah Concept. https://www.bankrakyat.com.my/c/business/shariah_concept_b/shariah_concept-5.

Bukhari, Muhammad. (1987). Sahih al-Bukhari. (M. Muhsin Khan, Trans.). Darussalam. https://sunnah.com/bukhari:1304

CompareHero.my Team (2019, 31 October). Your Guide To Islamic Credit Cards. CompareHero. https://www.comparehero.my/articles/guide-islamic-credit-cards.

Fairooz, A. K. M. (2016). Bilateral rebate (ibra’ mutabadal) in Islamic banking operation: A critical appraisal. International Journal of Islamic and Middle Eastern Finance and Management, 9(3), 435– 452. https://doi.org/10.1108/IMEFM-07-2015-0085

Ishak, M. S. I. (2019). Malaysian banking: Is the current practice of ibrā’ (rebate) reflecting its true meaning? Qualitative Research in Financial Markets, 11(1), 22–30. https://doi.org/10.1108/QRFM08-2018-0096

Saad, N. M. (2014). The study on Islamic credit cards (Practice by Islamic banks in Malaysia). Masters thesis, Universiti Utara Malaysia. https://etd.uum.edu.my/4199/.

The Qur’an 16:96 (Translated by Saheeh International). https://quran.com/an-nahl/96

The Qur’an 28:26-27 (Translated by Saheeh International). https://quran.com/ms/28

The Shariah Advisory Council (SAC) of BNM. (2010). Shariah Resolution in Islamic Finance. In Bank Negara Malaysia (Second Edi). Bank Negara Malaysia.

Uddin, M., Hossin, M. M. I., Chowdhury, AHM. Y., Islam, M. A. (2018). Concept of Islamic Credit Card Based on Malaysia. Saudi Journal of Business and Management Studies (SJBMS), 3(2), 172-176. http://scholarsmepub.com/sjbms/.