The Al Buraq Islamic Credit Card

Since 2002, ABC Islamic Bank E.C, a wholly-owned subsidiary of Arab Banking Corporation, has issued the first Islamic credit card. The card, considered the first Islamic credit card that conforms to Sharia principles, is expected to be well accepted by all customers who prefer to utilise a credit card based on Glorious Sharia principles.

Prior to launching the card, ABC Islamic Bank (E.C.) established an Islamic credit card company with a variable capital. The company has issued two classes of capital. The authorised capital of Management Shares (Class A) is US$5,000,000 with a paid up of US$3,000,000, and Participation Shares (Class B).

The card has been issued to its employees and some corporate clients and while distribution to corporates continues, the card is available to individuals through participating banks. ABC Islamic Bank (E.C.) is now concluding the participating agreements with these banks.

ABC Islamic Bank (E.C.) chose the name Al Buraq for the new card. Al Buraq is the name of the creature that Prophet Mohammed is said to have rode on when he made his miraculous night journey. This name has been chosen for its religious connotation and because it represents speed and trust. The card will provide benefits similar to normal credit cards in terms of settlement and international recognition. It will be distributed through various retail banks and is intended to be promoted by both Islamic and conventional banks.

Mr. Mohamed BuQais, General Manager of ABC Islamic Bank (E.C.), Bahrain, has clarified that ABC Islamic Bank (E.C.) invited major Islamic banks and financial institutions to participate in Class B shares, allowing these banks to issue credit cards to their customers in their home countries. Arab Financial Services Company, an affiliate of Arab Banking Corporation, is responsible for producing the card and is also the technical manager and processing agent.

Can A Credit Card Ever Be Halal?

Can a credit card ever be Halal?At first glance you’d be forgiven for thinking that a marketing brochure for an Islamic credit card must be some kind of elaborate hoax. But banks in the region are now making such seemingly impossible concepts a reality

We all know the arguments in favour of credit cards: “it enables me to spread payment for large purchases;” “it’s too dangerous to carry cash;” “sometimes a card is a prerequisite for transactions such as Internet purchases and rental collateral”. The problem for Muslim consumers, of course, is that the whole concept of the conventional credit card is unacceptable on religious grounds. Interest payments made when the outstanding balance is not repaid in full are Riba payments, and therefore forbidden in Islam.

Despite this clear-cut position, there are various grey areas of interpretation that enable some Muslims to align credit card usage with their religious beliefs. For example, if one commits to paying off the balance every month and therefore never utilises the credit option of the card, then one can say that Riba is being avoided and thus the card is Halal. As Islamic scholars such as Shariffa Carlo Al Andalusia have discussed when debating such interpretations, however, this argument still doesn’t hold 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. Since no human can either know what the future holds or guarantee their own infallibility, such scholars say, then Muslims cannot enter into any contract that promises that they can.

From the card issuer’s point of view, therefore, several problems become instantly obvious. Not only will the bank make little or no revenue from a credit card if the balance is repaid in full, but in religious terms it will be colluding in the commitment of sin if it arranges and signs a contract wherein a Muslim agrees to pay Riba in the case of non-payment of the balance. Quite apart from that, the extension of credit with a view to making profit is not a Qard Hassan loan, and thus is unacceptable in religious terms for the creditor as well as the borrower.

Despite this daunting and complex problem, banks have tallied up the market of some 250 million Muslims in MENA and Asia who want and need financing options, and several have decided that this is an opportunity too great to pass up on. Some banks have reacted to this situation by offering credit cards that aren’t credit cards at all in a conventional sense. The Dubai Islamic Bank, as just one example, offers a Visa Classic Card but then debits the balance automatically from the holder’s current or savings account every month. In effect this is a debit card, as officially no credit is extended to the consumer and so no injunctions against Riba have been broken. The consumer may get a short-term loan in practice, for example if he purchases an item at the beginning of the month and the payment is not debited until the end of the month, but that is a matter of bank administration rather than any deliberate contract to loan funds with a view to paying interest on them. [more]

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