Glossary
Kafalah
A guarantee: one person promising to cover another person's debt if they do not pay.
Kafalah is suretyship. On a card the issuer guarantees the merchant or the card scheme that the cardholder's purchases will be paid. Whether the bank may charge you for that guarantee is genuinely contested. AAOIFI Shariah Standard No. 5 clause 3/1/5 says 'it is not permissible to take any remuneration whatsoever for providing a personal guarantee per se', allowing only expenses actually incurred, and its Appendix B explains that a guarantee is a contract of charity. DSN-MUI Fatwa No. 54 expressly allows the Indonesian issuer to receive an ujrah kafalah.
This is also a card contract structure
The bank stands behind you and promises the shop it will pay, then collects from you.
How Kafalah works on a credit cardRelated terms
Sources
- AAOIFI Shariah Standard No. (5) clauses 3/1/5, 6/1/1 and Appendix B; DSN-MUI Fatwa No. 54/DSN-MUI/X/2006 clauses Ketiga (a) and Kelima (d)