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Islamic Credit Cards
Countries:United Arab Emirates101Malaysia88Saudi Arabia111Pakistan8Indonesia10Qatar38All countries

Glossary

Bai' al-Inah

Selling something to someone on credit and buying it straight back for less cash, so they get money now and owe more later.

بيع العينةbay' al-'īnah

Bai' al-inah is tawarruq with no third party: the same two people do both sales and the asset ends up where it started. AAOIFI calls it 'a trick for practicing Riba' and 'strictly prohibited', and notes that the majority of jurists prohibit it. Malaysia historically permitted it, following views attributed to the Shafi'i school, and Bank Negara's SAC approved a card built on inah plus wadi'ah in April 2001. Malaysia then narrowed it: in February 2009 the SAC ruled that any stipulation to repurchase renders the contract void, including one appearing in a recital, brochure or appendix.

This is also a card contract structure

The bank sells you an asset on credit at a high price and immediately buys the same asset back from you for a lower cash price, so you walk away with cash and a bigger debt.

How Bai' al-Inah works on a credit card

Related terms

TawarruqBuying something on credit and selling it on for cash, so you end up with money now and a bigger bill later without paying interest.WadiahSafekeeping: leaving money or goods with someone to look after for you.RibaAny extra amount a lender gets back on top of what was lent, which Islamic law forbids.SACShariah Advisory Council: Malaysia's national body whose rulings on Islamic finance bind the industry and are a reference for the courts.

Sources

  • AAOIFI Shariah Standard No. (30) clauses 2 and 4/5 and Appendix B; Bank Negara Malaysia, Shariah Resolutions in Islamic Finance, 2nd edition, items 72, 73, 89

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