Comparative study of Islamic credit card between Indonesia and Malaysia from the Islamic legal perspective

Abstract

A credit card facility provided by conventional banks and financial institutions has sparked a debate among the practitioners and scholars regarding the element of interest (riba). However, beginning more than a decade ago, Muslim scholars have come up with alternatives to replace the conventional credit card by applying contracts which are in accordance with Shariah principles. Islamic banks and Islamic Financial Institutions (IFIs) have tried to adopt the best Islamic contracts for the Islamic credit card in order to eliminate the element of riba and gharar, so the card can be used as long as the credit payment can be made before its due date. The purpose of this study is to provide a better understanding of Islamic credit card as well as to evaluate the instruments and structures involved in the operations. Additionally, through library research, as well as descriptive and comparative approaches, this research attempts to look at the Malaysian and Indonesian banks practices of Islamic credit card by analyzing their structures and operations of implementing the card. Related Shariah issues and legal frameworks used as the basis for the issuance of Islamic credit card are also discussed. The results proved that the structures and operations applied for Islamic credit card of both countries are different in terms of contracts, and in terms of Shariah issues that were raised. Nevertheless, the current contracts of Islamic credit card in both countries have been approved by each countrys own Shariah Advisory Council. The role and responsibility of the Shariah Advisory Council is very important to ensure the contracts and operations of Islamic credit card comply with Shariah principles.