Islamic Cards: issues & possible directions

ISSUE 1: Where is the growing demand for Islamic cards coming from? Obviously the growth of Middle Eastern economies through petrodollars plays a part, but what about countries such as Malaysia and Indonesia ? Is it also because cards are a cheaper financial product proposition to offer?
SOLUTION:

• Shari’ah (Islamic) Cards include Credit card, Debit Card, Mult-purpose card and Loyalty Card.


• The growing demand of Shari’ah compliant Cards come from Dubai, Malaysia and Bahrain with almost equal efforts and spirit followed by other countries like Indonesia, Qatar, Saudi Arabia, Kuwait, Brunei and UK.


• Such a growing phenomena is basically contributed by petrodollars but also the adaptation of Multi-currency basket especially in Malaysian Islamic Banking Practices.


• Growing phenomena is also contributed not only be Shari’ah card is one of the cheaper financial product but also it ensures a sort of security and convenient for the customer concerned.

ISSUE 2: The development of the differing models of Islamic finance – will this create problems for an increasingly globalised financial network?

SOLUTION:

• Different models of Islamic finance adapted and applied in different parts of the world are because of: (i) different Mazhab (Schools of Islamic Jurisprudence); and or (ii) advancement of research and action by respective players in the Islamic Financial Industries; or (iii) the differences of views of the Shari’ah Scholars.


• It shall neither be an issue nor confusion as this may be a healthy culture in the growth of Islamic finance globally.


• Because, different experiences and practices may discover an opportunity to share knowledge and upgrade own products, policies and mechanisms to pave the utmost satisfaction of customers with gradual effect.

ISSUE 3: Processing and operations for Islamic cards must all be Shariah compliant – how does this work? Is it a challenge, given that processing in particular is now more a game of scale than anything else? SOLUTION:

• Processing and operation for Islamic Cards shall be with Shari’ah compliant is neither a challenge nor a game but a system with different mechanisms offered within the spirit of Shari’ah principles applicable to all regardless of one’s religion, race or status.


• For example, Conventional Card adapts fixed interest, which is opposed by Islamic Financial Principles.


• Alternatively, Islamic Card is processed and operated based on the principles of Service Charge (Ju’alah), Buy Back Sale with SPV (Tawarruk), Sale with mark up by Deferred Payment (Murabahah) etc which offer the products in view of Risk sharing (opposed to Risk transferring), Mutual benefits (opposed to gaining on liability account).

ISSUE 4: Fees vs. Interest: Islamic credit cards seek to mimic rather than differentiate themselves from alternatives (unlike other Shariah compliant products) – is this a problem? Will potential customers fail to see the benefits? SOLUTION: Please refer the Solutions to ISSUE 3.

ISSUE 5: Conversely, these products are invariably cheaper for cardholders – could Islamic cards open up and become somewhat akin to an ‘ethical’ option for consumers? I understand that some banks offer the cards to non-Muslims. SOLUTION: please refer the Solutions to ISSUE 3.

ISSUE 6: Are Shariah scholars more averse to credit cards than other financial products such as loans and mortgages i.e. they promote consumerism and spending beyond one’s means. Will this mindset prove to be an obstacle for the industry? SOLUTION:

• Shari’ah Scholars concern on a just financial planning and application within the standard of Shari’ah ethics and spirit, which shall be beneficial for all Muslim and non-Muslim with no discrimination per se.


• Therefore, Islamic card is not an exceptional Islamic financial products as far as the treatment by the Shari’ah scholars are concerned.


• It is Shari’ah ethical spirit (as a principle of Islamic Financial Planning) to economize spending and mange own wealth rationally, which is oppose to spending excessively and or beyond the capacity.


• But, the responsibility with rationalism in spending culture / habit is personal rather than state or community responsibility


• Therefore, Shari’ah principles on spending unnecessarily do not really indicate an obstacle to the growth of Islamic Card.


• Because, using the Islamic Card does not really give a chance the user to spend unnecessarily but it depends on one’s personality and personal habit.


• Hence, management of own wealth is a personal responsibility, and no connection with the fact of having Islamic Card can influence one to spend excessively.