Are Buy Now Pay Later (BNPL) Contracts Halal?
In the past few years Buy Now Pay Later (BNPL) options have exploded, with most online retailers now offering this payment method. However, given Islam’s prohibition of interest, should Muslims be wary of BNPL schemes?
In the article “Contracts in Islamic Law: The Principles of Commutative Justice and Liberality” in the Journal of Islamic Studies, economist Hussein Hassan discussed the process of ensuring equality through different methods: distributive justice, which “is meant to ensure that each citizen is allocated a share of whatever is being divided” and communitive justice, which “is concerned with preserving a citizen’s share of the resources”. Among the restrictions used to ensure commutative justice in Islamic law is the requirement for immediate transfer of ownership from the seller to the buyer. The exception to this is salam contracts, which allow for pre-payment of goods with delivery at a specified future date. Salam contracts are of great importance nowadays, due to the increase not only in internet shopping (and its inherent delay in shipping and delivery) but also in pre-orders, Kickstarter and crowdfunding campaigns, as well as with BNPL schemes.
In an excellent blog post on Ethis.co (an Islamic investment company) the CEO of Global Islamic Financial Services Firm, Mufti Ismail Desai, argues that whilst BNPL has tremendous…
