Islamic Credit Card-A Prospective in Islamic Banking in
Bangladesh
Tanzina Hossain
Senior Lecturer
Department of Business Administration
Faculty of Business and Economics
Daffodil International University
E-mail: tanzinaema@yahoo.com
Cell: 01552-325686, 01713493069
Islamic Credit Card-A Prospective in Islamic Banking in
Bangladesh
Abstract:
In Bangladesh Islamic banks have proved to be very successful in providing their clientele with banking services. But in order to reap
full benefit from this business, they need to develop a parallel system and to launch more innovative products along with other banks.
Credit card is one such product. Interviews with bank clienteles and officials show that people of Bangladesh want credit card which
is more convenient and fully acceptable on religious ground. This study will show the practice of Islamic Credit Cards issued by
EXIM bank and Standard Chartered Bank, which are the only Islamic Credit Card issuers in Bangladesh. By exploring the
potentiality of Islamic Credit Card, this paper suggests that Islamic banks can proliferate their banking business in Bangladesh
moving towards launching Islamic Shariah-based credit cards to go well with different financial needs of their clientele.
Key words:
Islamic Credit Card, Riba, Ghatrar, Maysir, Bai-al-inah, Tawarruq, Bai-Murabaha, Ujarah,
Market Potentiality.
1.0 Introduction
Today’s consumer credit behavior starts at early adulthood and extends well into the retirement
years. People continue to demand new credit instruments and challenge the bankers the ability to
deliver a wider range of credit products. Credit card is one such product whose conveniences
have led the widespread of its business. Therefore, not only conventional banks are interested in
issuing credit cards but also Islamic banks which notably have to comply with the Islamic
principles have started to come out with this product. Through this an islamic bank can act not
only as a financier but also a partner in uplifting the economic condition of its customers by
creating additional purchasing power.
Bangladesh is a predominantly Muslim country and a large portion of this has not been able to
access the existing credit card services as per Islamic principles. So there is a palpable demand
for Islamic Shariah-based credit cards in Bangladesh. But there are only two Islamic Credit Cards
available (one of which is issued by a non-islamic bank) to meet up the demand which are too
little to fulfill the immediate credit needs of the Muslim community. So, this is the right time for
Islamic banks to think about launching Islamic Credit Card to tap the potential credit card market
for religious people of Bangladesh. This study investigates the emergence and the potentiality of
Islamic Credit Card business highlighting the problems and recommendations through its three
sections.
2.0 Islamic Credit Card
The Islamic Credit Card is one of the alternative banking products introduced by Islamic financial
institutions to substitute for the conventional credit card. It is considered as a new dimension of
product resulting from technological development in Islamic banking arena which is a
combination of Islamic principles and the Islamic accounting system being put together in
software. According to Massey (2007), an Islamic Credit Card is a payment instrument that meets
with at least three criteria of Islamic principles. Firstly, the card must meet the Shariah
requirements on lending, which vary from region to region. In general, it must avoid the three
essential prohibitions in Islamic finance, which are riba, gharar and maysir. Secondly, an Islamic
Credit Card must have certainty to be accepted widely. It has to use international payment
schemes, such as MasterCard or Visa. Besides that, the card should provide facilities that are not
available on debit cards such as CVV numbers for “card not present” transactions and hold
amounts. Furthermore, the merchant charges and issuer’s fees should not be withheld. Thirdly,
an Islamic Credit Card should not encourage behavior that is considered haraam.
3.0 Literature Review
Among all plastic payment cards, much focus is on credit cards which encourage people to spend
beyond their means and get mired in debt. However, credit cards have enabled many more of us
to achieve a better standard of living. (Evans & Schmalensee, 2005). There are many key reasons
for which researchers, bankers as well as policy makers have shown lots of interest for credit
card. Almost all the leading conventional banks have various credit card facilities in offer for
the customers in comparison with Islamic banks. It is believed that by implementing Islamic
Credit Card an Islamic bank can be able to fortify its competitive edge over others in rapidly
changing competitive environments.
However, a controversial subject exists among Islamic jurists of whether conventional credit
cards are permissible to muslims and if the credit cards available as Islamic Credit Cards are
really in line with the beliefs of muslims or just another kind of conventional cards under Islamic
banner. (Bakhshi, 2006). Dr Monzer Kahf in Live Fatwa on Islam on line dated August 8, 2001
responded, “Signing a credit card contract and using it in a way that generated payable interest is
haram. It is then borrowing on interest. Signing the contract, using it, and making the payments
within the grace period and making no cash withdrawals (whenever cash withdrawals generate
interest), is permissible because it amounts to a contract that gives you a choice to deal or not to
deal with interest”. Shaykh Ibn ‘Uthaymeen (2002) (may Allah have mercy on him) argues that
credit card transaction is haraam, because the one who enters into it commits himself to paying
riba if he does not pay on time. This is an invalid commitment, even if he believes or thinks it
most likely that he will pay it before the time is up, because circumstances may change and he
may not be able to pay it off. This is a matter that is in the future, and no one knows what will
happen to him in the future. So dealings of this type are haraam. (Shaykh, 2002).
However, according to the majority of the contemporary scholars (fuqaha), the usage of creditcards is permitted provided the card-holder is sure he has the ability and will actually pay off the
debt to the card issuing company before any interest becomes due. Justice Maulana Muhammad
Taqi Usmani(2005), a renowned Shariah scholar, permits the use of credit card by a purchaser
and declares that it is allowed in Shariah, no matter whether the card is issued by a banking
institution or some other company. However, the following points are important in this respect:
(i) The best way of using these cards is to authorize the card issuer to directly debit your bank
account for payments to avoid the possibility of default which may in some cases, carry the risk
of interest.
(ii) If the system of direct debit is not arranged, one must always be careful to pay the bills within
the stipulated time without fail, so that interest may not be imposed.
(iii) The annual fee paid by a card-holder to the card-issuing company is not interest; rather it is a
fee charged for certain services rendered by the company for the benefit of the holder. That is
why it is charged irrespective of the amount actually spent by the holder.
The relationship between the card-holder and the card-issuing company, from a juristic (fiqhi)
point of view as described by Muhammad (2005) has many ingredients. The relationship has an
element of brokerage/agency (wakala), guarantying payment (kafala) and lending money
(iqradh). The company undertakes and guarantees payment on behalf of the card-holder; hence
this would form the relationship of Kafala. There is also a promise from the card-issuing
company to give the card-holder a loan, and when the card-holder actually uses the card, the
relationship of agency (wakala) and actual giving of loan comes into play. The company pays the
seller on behalf of the card-holder; hence the company would be considered an agent on behalf of
the card-holder, and also forwarding a loan to him. All these three relationships (i.e. agency,
guarantying payment, and giving of a loan) are permitted in Shariah, as mentioned in detail in the
books of Fiqh. Thus, there is nothing that would make this contract unlawful. As for the
relationship between the card-holder and the seller of goods is concerned, contemporary scholars
state that the relationship here would be that of the debtor passing on the responsibility of
payment of his debt to a third party, known in Islamic jurisprudence as Hawala. Here, the cardholder passes the responsibility of paying for the goods to the card-issuing company. This
transferring of responsibility comes into existence when the card-holder signs on the receipt of
purchase. Hence, the seller would be obliged to take payment from the one to whom the buyer
passed on the responsibility. This contract of Hawala is also permitted and discussed in detail in
the various books of fiqh. Thus, the card-issuing company would be considered a broker and the
amount charged by the company is like a commission charged for brokerage services. There is
nothing wrong with this relationship also, neither is it unlawful for the company to charge the
seller a commission in return of the service provided.
4.0 Objective of the Study:
The purpose of this study is to provide a view of Islamic Credit Card with highlighting the
prospects and problems in Bangladesh. Specifically, the study is aimed at showing the
potentiality of Islamic Credit Card to the Islamic banks in Bangladesh and suggesting them to
strengthen its product line with it by considering some relevant issues to satisfy its clientele by
taking a closer look on the practices by Islamic financial institutions over the world.
5.0 Significance of the study
Several researches have been conducted based on Islamic Credit Card around the world.
However, no such study has been seen in Bangladesh. This study would be beneficial for the
banks that are yet to think about offering the Islamic Credit Cards in Bangladesh. There is lot of
scope for studying further in this field by looking into what other banks are doing all over the
world and how they can be incorporated in Bangladesh.
6.0 Methodology
The study is exploratory in nature which heavily relies on secondary sources available on the
websites of banks in Middle East and Malaysia and various other articles written on this area.
Along with those, annual reports, prospectus, newspapers, the bank’s internal records, and
websites constituted secondary information. Interviews of various Islamic banks’ officials and
customers constitute primary sources of data. Flow charts, and graph based on historical data
have been used to illustrate the credit card business in Bangladesh over the years.
7.0 Limitations of the study
Data collection is the major limitation of this study. To explore the prospects of Bangladeshi
Islamic Credit Cards, all data required could not be availed due to reasonable competitive reasons
of the banks. Hence, the study adopted the data of credit card holders from 1998 to 2006 available
from a study. If all required data were analyzed, the paper could have a more accurate analysis.
8.0 History of Islamic Credit Card
The concept of credit cards is allowed by the Shari’ah, if it does not involve the element of usury
because “Allah (SWT) permitted sale and prohibit usury”1. Keeping this in mind ABC Islamic
Bank in Bahrain has launched the first Islamic Credit Card named ‘Al Buraq' in the World in
2002 which is Riba free. Since the creation of Islamic Credit Card, a number of Islamic Credit
Cards have been established all over the world. The ABC Investments Limited (Barakah Islamic
Financial Services) ceremonially launched its first Islamic Credit Card in Sri Lanka. This Card is
tittled ‘ABC Barakah Credit Card’ which is the third Islamic Credit Card in the region. First in
Malaysia by AmIslamic Bank Berhad named Al-Taslif Card and second in Pakistan.
1
Al Quran, Surah Al Baqarah ,2:275
9.0 Some Regional Islamic Solution to Conventional Credit Cards
9.1 Islamic Credit Card in South East Asia
The first and a very popular mechanism used by Islamic banks in South East Asian countries are
based on repurchase or Bai-al-inah where two separate contracts, namely al-bay’ al-mutlak (cash
sale) and bay al-bai bithaman ajil (deferred sale), both of which are carried out after one another.
(Billah, 2004). Prominent examples for Bai-al-inah in Malaysia are the Al Taslif Credit Card
from AmBank in Malaysia (formerly the Arab Malaysian Banking Group) and the Bank Islam
Card (BIC) 23rd July 2002 from Bank Islam Malaysia. Bakhshi(2006). On July 18th 2007,
Syariah Division of Bank Danamon (PT Bank Danamon Tbk) launched the first Islamic Credit
Card in Indonesia, called “Dirham Card” based on three aqad (contracts): kafalah (guarantee),
qardh (loan), and Ijarah.
9.2 Islamic Credit Card in Gulf
At about the same time that Shamil launched Al Rubban, fellow Bahrain-based institution, ABC
Islamic Bank, also released details of its Al Buraq Credit Card. On August, 2008 Bahrain Islamic
Bank (BisB) has announced the launch of its new Islamic Visa credit card. Tayseer Al-Ahli, a
new Islamic financial instrument was introduced by The National Commercial Bank in Saudi
Arabia through an Islamic mechanism based on Al-Tawarruq. Al Rahji Banking & Investment
Corporation (ARABIC) in Saudi Arabia also offers Shariah-approved Visa and Master Cards.
10.0 Comparison of Islamic Credit Card and Conventional Credit Card
After a long thinking about how to "Islamize" the credit cards, many Islamic banks around the
world have introduced Islamic Credit Cards. There are few issues that arise in comparing
conventional credit card with Islamic Credit Card.
No money lending: The Islamic Credit Card is issued based on the underlying trade transaction
(Bai) and the element of usury has been eliminated from the said transaction which is applied in
the conventional money lending.
No compounding of profits: Profit margin imposed by the bank on cardholders is fixed and not
compounded. The total profit imposed on cardholders cannot be more than the total profit as
stipulated in the transactions. Therefore, cardholders will know the maximum cost that will be
imposed within the contract period, unlike conventional credit cards, whose interest rates are
often undetermined ahead of time.
Control on transactions/merchants: The users of Islamic Credit Cards are allowed to carry out
only halal transactions. They are restricted to use the cards for six categories of non-halal related
activities, including activities in bars, discos, night clubs, and purchase of beers and gambling.
11.0 Islamic Credit Cards in Bangladesh
In August 2001, Dato Azlan Hashim, deputy chairperson of Arab Malaysian Bank visited
Bangladesh, and explained the different aspects of the Shari'ah-compliant card at a conference
"Islamic Credit Card: From Concept to Inception" to propagate the concept of an Islamic Credit
Card in Bangladesh. But since it would cost $5 million to obtain and install the software needed
to start such a venture, it was reported that the card named Islamic Credit Card was supposed to
be introduced by a consortium of primarily five local Islamic Shariah based banks (Islami Bank
Bangladesh Ltd, Shahjalal Bank Ltd, Al-Arafah Bank Bangladesh Ltd, Social Investment Bank
Ltd and Al-Baraka Bank Bangladesh Ltd.).
In 2001, IBBL announced its plan to launch an Islamic Credit Card, but this did not work out due
to technical reasons as well as a debate on whether the bank should levy a service charge or ask
for a share in profit. While IBBL is rethinking its plans, other Islamic banks in the country are
pondering on the viability of introducing an Islamic Credit Card. Shahjalal Bank is exploring the
possibilities with a Malaysia-based integrated card system provider. Social Islamic Bank Ltd
itself has a plan at the moment to bring out an Islamic Credit Card. (IslamBank, 2002)
Among seven full-fledged Islamic banks in Bangladesh, only Exim bank has recently launched
credit card named VISA Islamic Credit Card under the principle of Bai-Murabaha in 2008.
Before that, viewing the huge and growing demand for Islamic cards in Bangladesh, on 4th july,
2007, Standard Chartered Bank has launched Saadiq VISA Credit Cards on ‘Ujrah’ concept.
11.1 Existing Islamic Credit Cards:
11.1.1 VISA Islamic Credit Card by EXIM Bank
EXIM bank has started to issue its credit cards from 2nd August, 2008 to all categories of citizen
in Bangladesh on Bai Murabaha concept where the bank agrees to buy an asset or goods from a
third party at the request of its clients, and then resell the goods to its client with a mark-up profit.
The client purchases the goods either against immediate payment or for a deferred payment.
Customers/
Cardholders
Bank
Bank sells the goods at cost plus profit
to customers (on deferred payment basis)
2
3
1
Cardholder identifies goods or
services as an agent of bank
At the request of its
clients, Bank owns
the
goods
from
merchants
Merchants
Figure 1: Scheme of VISA Islamic Credit Card
Through this card EXIM bank offers several facilities to its cardholders including lowest profit
rate, dual currency transaction facilities, hidden charges free, 24 hours customer service, Instant
card message service in mobile, etc. The fundamental features of Islamic Card are as follows:

Bank will sign an agreement with the cardholder for one year term.

Markup profit will be charged @ 20% for one year on every billing amount (monthly
total transaction) which will be treated as individual deal in each month. If a cardholder
fails to pay his/her card bill, he/she will be penalized as late payment penalty as per
bank’s prescribed rate plus profit will be charged for one month (i.e, marked up profit on
single deal/12). If a cardholder pays minimum payment or less than total billed amount,
profit will be charged on total transaction amount on monthly basis (i.e, marked up profit
on single deal/12). On the other hand, if a cardholder pays his/her card bill fully in time
(i.e, on or before payment due date), he/she may be given rebate (not mandatory).
11.1.2 Saadiq VISA Credit Card by Standard Chartered Bank
Standard Chartered has introduced its credit card on the ‘Ujrah’ principle which provides
customers with the flexibility of paying only a fixed monthly maintenance fee and does not
depend on the outstanding balance.
1
Upon fulfilling the requirements customers get credit card from bank
Customer/
Banker
Cardholders
After getting the statement sheet,
cardholder repays the due in full plus a
fixed monthly maintenance fee
2
4
3
Bank pays to the merchants
on behalf of the card holder
deducting its charges
Customer makes transaction using credit card
Merchants
Figure 2: Scheme of Saadiq VISA Credit Card
Standard Chartered Bank offers a range of facilities through its world-class service infrastructure
to its Saadiq cardholders including worldwide recognition and acceptance, easy credit, instant
cash advances, round-the-clock service, paying utility bills and more by phone, availability of
several supplementary cards, Instant card message service in mobile, etc.
11.2 Comparative Analysis of Fees & Services
EXIM Bank is enjoying a competitive edge in case of annual fee, excess limit, late payment,
returned cheque, PIN Replacement fee, etc. whereas SCB is ahead in card replacement fee, and
minimum amount due. The main difference between VISA Credit Card and Saadiq is inherent in
charges imposed for outstanding balances. EXIM bank charges a fixed rate whereas SCB charges
a fixed amount. That means, charges will vary according to outstanding balances in case of VISA
Credit Card but in case of SCB, charge will be fixed whatever the outstanding balance is. Both
issuers provide cash advance facility of 50% of the credit limit with same minimum grace period
& outstation cheque collection fee. Although for cash advance facility EXIM charges a fixed rate,
SCB charges a fixed amount. SCB charges extra fees for duplicate statement, monthly
maintenance, certificate card cheque book issuance & usage (1st card cheque book is free)
whereas EXIM Bank only for sale slip retrieval. EXIM bank provides 1st supplementary credit
card as free (in case of SCB it is two) whereas SCB provides a wider range of facilities at free of
cost such as global usage privileges, access to Balaka Business Lounge, SMS banking, etc.
Different types of services and fees through credit card offered by both issuers are listed in
appendix-1.
11.3 Comparative Analysis of Number of Islamic Credit Cardholders
Appendix-2 illustrates the number of cardholders by two issuers from year 2007 to year 2010 (till
March).The table reflects that though the practice of Islamic Credit Card is new in Bangladesh,
due to its huge demand the number of cardholders is increasing substantially over the years.
During January-March, 2010, total number of card holders in EXIM bank stood at 1000 which is
66.67% higher than the holders achieved during the same period of 2009, and only 50% lower
than the cardholders during the entire period of 2009. In case of SCB, it stood at 17,232 which is
45.37% higher than the holders achieved during the same period of 2009 and 42.6% higher than
the cardholders achieved during the entire period of 2009. In 2009, the card holders of EXIM
bank increased by 122.22% (from 900 to 2000) from the cardholders achieved during the last five
months in 2008 but that of SCB increased by only 2.51% from the cardholders achieved during
the entire period of 2008. SCB has experienced an enormous growth (155.04%) in 2008 from the
cardholders achieved during the last six months in 2007. From the table, it is clear that SCB
enjoys a competitive edge over EXIM in terms of total number of cardholders which is 953.95%
higher than that of EXIM bank.
11.4 Comparative Analysis of Profit from Islamic Credit Card
From appendix-3 it is viewed that both the issuers have gained a healthy growth in profit till
March, 2010 from its inception. Though SCB saw a low growth in number of cardholders, it
experienced a tremendous growth in profit in 2009(150%). Higher number of cardholders has
lead SCB towards a higher profit than EXIM which is 126.36%.
12.0 An overview of Bangladesh Credit Card Industry
Banking sector is the developed field in the financial service arena in Bangladesh. Almost all
banks have strengthened its services through electronic payment system and credit card tops the
list of such products. Although credit card was introduced in Bangladesh in 1997 by a local bank
namely National Bank, at present there are twenty three banks and one financial institution
(Lanka Bangla) issuing Credit Cards in Bangladesh. ANZ Grindlays Bank (now Standard
Chartered Bank) has been the market leader in this particular market since they first introduced
the local currency based credit card in Bangladesh in January 1997. (Debnath and Gurung, 2008).
According to Mohammad Anisur Rahman, officer of National Credit & Commerce Bank, "a
credit card has many advantages that make it preferable to paper money in many countries. The
expansion of credit facilities holds great promise for spurring the growth of the Bangladeshi
economy and pulling it out of recession." He added that, currently there are more than two lakhs
credit card holders in Bangladesh. (IslamBank, 2005). However, credit card is a highly interest
based card in the world. According to AKM Shahidul Islam, Honorary Consul of Malaysia, in
Bangladesh, the banks charge 3% monthly interest on users and it (interest) subsequently goes up
to 25 to 30 per cent every year. According to him, the growth rate of credit card in Bangladesh is
15 per cent per annum. (IslamBank, 2002). Appendix-4 shows the number of credit card holders
from 1998 to 2006.
Credit card holders over the years
No. of card holders
250000
200000
150000
credit card holders
100000
50000
0
1998
1999
2000
2001
2002
2003
2004
2005
2006
Year
Figure 1: Number of Clients holding Conventional Credit Cards, 1998-2006
The above line graph reflects that business of credit card is growing in Bangladesh with a positive
trend. The total number of credit cardholders stood at 1,607 by the end of 1998 and it is growing
moderately till 2006 with 221,100 holders. (Rahman, 2007). The record indicates that the
globally-booming credit card system is making paces and gaining popularity in Bangladesh.
13.0 Market potentiality of Islamic Credit Cards in Bangladesh
The existing credit cards in Bangladesh are highly riba-based with conventional banks charging a
3 percent monthly interest. (IslamBank, 2002). Despite this, many Muslims have been using this
credit card for a long time as Shari’ah-compliant credit card is not available. Bangladesh is a
substantial Muslim populated country with Muslims making up more than 90% of the nation's
156 million population (July, 2009 ets.) and majority of them, in the name of religious faith, are
looking for riba free Shariah based Islamic Credit Card. So, Bangladesh holds a lofty demand for
Islamic Credit Card. "There is tremendous market potentialities of Islami credit card….millions
of people would use it in Bangladesh," Shamsul Huda, a Shariah Councilor of Islami Bank said.
He added, “It was hard for Islami banks to keep them isolated from global competitions rather
than adopting the credit card idea”. (IslamBank, 2005). Therefore, Islamic banks can tap this
potentially lucrative market with the launch of an Islamic Credit Card.
Viewing this potentiality, two banks (EXIM and SCB) in Bangladesh cannot afford to ignore of
launching Islamic Credit Card for this promising geographic market, where huge sections of the
population still do not possess a credit card. Armed with their product developers and Shariah
compliance advisers, they claim to have innovated Islamic Credit Card structure which is
Shariah-compliant and yet competitive in both cost and benefits to the cardholders. However,
these are not enough to satisfy the immediate credit needs of religious people in Bangladesh. In
addition to this, although islamic banks have a niche market in the small market of Bangladesh,
still they haven't been able to tap all Muslims who even today steer clear of conventional banks to
avoid interest. So to get them in their track, the establishment of Islamic Credit Card can be an
effective tool. However, Islamic Credit Card is not restricted to Muslims. A non-muslim can also
apply for the card. But this credit card does not have any use in places, like casinos or pubs.
The prospect of the Islamic banking systems in Bangladesh is so intense that seven full-fledged
private Islamic banks and 20 Islamic banking branches of conventional banks have been
established. Thus, the Islamic banking system in our country is expected to face strong
competition not only from the Islamic banks but also from their well-established conventional
counterparts offering Islamic products and services. So, bankers in our country must be mindful
of their role within society as the supplier of Islamic equivalents of modern products introduced
by conventional banks to foster its growth in the competitive financial arena of Bangladesh.
Furthermore, as day-by-day the nature of using banking products as well as customers’ behaviors
toward them are changing fast, Islamic banks must continue to strive to innovate new products.
They need to offer various attractive schemes for their customers, which are very popular in the
market. Moreover, to ensure the customer satisfaction the Islamic bank should provide full fledge
banking services like its conventional counterparts which will help Islamic banking to become the
mainstream banking system in Bangladesh. So, it is expected that the more Islamic banks start its
credit card facility, the more people will flock to the Islamic banking sector to avoid interest
which ultimately shows optimism towards the demand for Islamic Credit Card.
14.0 Islamic perspective on credit cards (Fatwa’s)
In recent years, the competition between Islamic banks has increased over offering Shariah based
credit cards but a big dilemma exists whether or not Muslims can use those cards. There is a large
group which considers these cards as no different from the conventional ones. The problem for
muslim consumers is that there are some terms and conditions applied in Islamic Credit Card that
are unacceptable on religious grounds. An interest payment on the outstanding balance of an
Islamic Credit Card is forbidden in Islam. (Bakhshi, 2006). Moreover, the extension of credit with
a view to making profit is not a Qardhul Hassan loan which is also unacceptable in religious
terms for the creditor as well as the borrower". (“Can a credit card ever be halal”, 2003). Another
problem with Islamic Credit Card is that it cannot really deal with items such as cash
withdrawals, the purchase of services or consumables, as there is no asset for the bank to buy
back. (Massey, 2007). In addition to these, some of the muslims are of the view that the amount
charged for the service rendered by the card-issuing company is somehow considered almost the
same with the interest applied in conventional credit cards hence not allowed in Shariah.
However, there are various grey areas of interpretation that enable some muslims to believe that
credit card usage can be done within religious beliefs. According to them, by not carrying any
outstanding balance to next billing period and avoiding cash withdrawals, riba can be avoided and
using in this way, a card could be halal. This argument can be supported further by stating that all
deeds are by intention and since the intention is to clear the full balance every time and not
withdraw cash, card is halal. (Bakhshi, 2006). Different muslim scholars has stated arguments in
favor and against of using Islamic Credit Card. Shariffa Carlo Al Andalusia, an Islamic scholar,
has debated such interpretations as not holding water since the signing of a credit card agreement
is the signing of an agreement to pay riba should the cardholder fail to make every repayment in
full and on time. In her article on credit cards, she argues “we are agreeing to commit a major sin,
under certain circumstances, which we cannot guarantee will not happen, and which are
improbable.” (“Can a credit card ever be halal”, 2003)
However, Islamic Credit Cards are widely used in many countries over the world and the
popularity is increasing day by day. Different banks are using different laws and rules to structure
the Shariah-based credit card. There are many interpretations within Islam on what is acceptable,
given that the schools of thought on Shariah law are not homogenous.
The Islamic cards in Malaysia based on the Bai Inah concept might not be able to penetrate the
Gulf markets, which insist that Bai Inah is not a sufficiently strong basis for issuing Islamic cards.
This type of product is often criticized for camouflaging interest payments. The Banker reported
that the concept is ethically flimsy when applied in this manner as the sale transacted is a fake
sale and thus, just a means of masking riba. Therefore, the structure or basis for Malaysian
Islamic cards has been criticized for not being wholly Shariah compliant as compared to Islamic
cards issued by Bahraini banks. However, Malaysia follows the Shafie School of madzhab, which
approves the Bai Inah transaction for Islamic cards as it conforms to all the essential elements of
a valid sale. (Evolution World, 2008).
Apart from all of those controversies, the opportunity of Islamic Credit Cards to gain attention
from Muslim credit card users is very high which compelled some Islamic bankers to get used
uncontroversial aqad to be applied in the operation of Islamic Credit Card. According to Massey
(2007), there are at least two aqads those can be valuable in case of Islamic Credit Card. Firstly is
murabaha. Secondly is tawarruq. Islamic Credit Cards in Bangladesh are based on Bai-Murabaha
and Ujrah concept. Under Bai-Murabaha, EXIM bank realizes the mark-up profit which is for the
services the bank provides-seeking and purchasing the required goods at the best price.
Furthermore, the mark-up is not related to time because, if the client fails to pay a deferred
payment on time, the mark-up does not increase due to delay and remains as pre-agreed. Most
importantly, the bank owns the goods between the two sales and so assumes the title and the risk
of the purchased goods, pending their resale to the client. (Hourani). Under Ujrah concept, SCB
confirms that all 'Saadiq' policies and services are free of interest application, and are approved
by the bank's Saadiq Global Shariah Supervisory Board for reflecting the values of the Muslim
people. However, according to some muslims, these credit cards are still needed to be revised for
the customer’s conveniences; even it still applies uncontroversial aqad.
After all, the Islamic Credit Card should be used wisely, so that consumerism problem which is
become a concern of most jurists can be overcome. Thus, the principle of Maslahah Al Mursalah
can be applied in the credit card transaction, since Allah want us to have easiness in life but of
course to be harmonized with the Holy Quran and Hadith of Prophet Muhammad p.b.u.h. so it
will not deviate from Shariah teaching. (Ferdian, Dewi and Rahman, 2008)
15.0 Problem & Recommendation of Existing Islamic Credit Card in Bangladesh
As Islamic Credit Card is becoming an emerging tool for the banking profitability, it should be
issued by the Islamic banks considering the contentious issues pertaining to the Islamic Credit
Cards so that the acceptance among Muslims can be improved. There are some issues
surrounding the applications of credit cards are needed to be addressed.
Card Limit
Credit card debt can sneak up on anyone quickly. Sometimes, it may happen that cardholders may
spend on what they had no plan to spend due to the availability of credit facility. If cardholders
don't get it under control right away; it can be quite detrimental to their financial future.
Mechanism to offer Islamic Credit Cards thus should be such that the use of the card will be
supported with the ability to pay within due date.
Free rate on Cash Advancement
If Islamic banks are ready to forgo charges on the cash advancement, it can be permissible in
Shariah. But looking from the bank’s view, this option is expensive due to the asset and liability
management conflict. So, for giving this facility, bank can impose a service charge but that
should not be computed by multiplying the percentage (%) with the advancement amount.
Profit Mark-Up
In Islamic Credit Card, charges for outstanding balance are imposed to customers. If it is meant as
a means of interest then it is haram. But if the charges become effective due to administrative
costs to maintain credit facilities, it is acceptable. But in this case the charges computation should
not be done in percentile on the amount of outstanding. It should be fixed but not as high as if the
holder uses a small amount through the card the charge becomes expensive for him.
16.0 Conclusion
From the above analysis, it is revealed that Bangladesh could be a significant market for Islamic
Credit Card, provided there is a favourable change in regulatory environment and increased
awareness among Muslims and in Bangladesh as a whole. Islamic providers of banking and
financial services in Bangladesh should look forward to the challenges for the industry as they
continually express a sense of higher purpose and a general concern for the socioeconomic
implications of the products they provide to customers. But with the exception of the EXIM bank,
no other Islamic bank has the credit card facility needed to cover the entire country. So, this is the
high time for the Islamic banks to enter into the market. Banks, which still are thinking about
launching Islamic Credit Card, should launch Islamic Credit Card considering halal. As success
in the banking business largely depends on effective lending, the more the income from credit
operations, the more the profit of the bank will be. The islami Shariah-based banks, whose
performance in credit creation is not up to the mark, can reap benefit by launching credit card to
facilitate their growth and achievements.