Glossary
Wakalah
Agency: appointing someone to act on your behalf, and paying them for it if you agree to.
وكالةwakālah
Wakalah is the appointment of an agent. On a card the argument is that the bank settles merchants on your instruction as your agent and charges an agency fee for doing so. Bank Negara's SAC examined that design in 2008 and found the characterisation 'not accurate', because the bank does far more than settle payments, and rejected pricing the fee off the credit limit. AAOIFI separately warns in Shariah Standard No. 5 clause 2/2/2 against combining agency and personal guarantee in one contract at the same time.
This is also a card contract structure
The bank acts as your agent, paying the shops on your behalf, and charges you an agency fee.
How Wakalah works on a credit cardRelated terms
KafalahA guarantee: one person promising to cover another person's debt if they do not pay.UjrahA fee or wage paid for a service done for you.IjarahA lease: renting the use of something, or someone's services, for a fee.AmanahTrust: holding something for someone else, so you are only liable if you were careless or dishonest.
Sources
- Bank Negara Malaysia, Shariah Resolutions in Islamic Finance, 2nd edition, item 93; AAOIFI Shariah Standard No. (23); Standard No. (5) clause 2/2/2