LAW 737

Question 14: The practice of Ujrah is

widely accepted by Muslim scholars.
Discuss the concept and practice of
this product in the Muslim world.
Prepared by:
Ainul Mardiyah Bt Mohd Ali
2012816858
Tunku Erika Nabila Bt Tunku
Hishammudin 2012593153
Zamriah Zarifah Bt Aris
2012638436

Introduction
The

definition

Ujrah refers to rental or fees for usage of labour

and benefits. In the current economic context, it
may be applied to salaries, wages, fees and
commission.

The Resolution
The SAC, in its 77th meeting dated 3 July 2008 and 78th meeting dated 30
July 2008, has resolved that the proposed credit card structured based on
the concept of ujrah is permissible subject to the following conditions:
Islamic

financial institutions shall ensure that the ujrah is imposed as a

consideration for the provision of actual or non-fictitious services, benefits
and privileges that are permissible under Shariah;
The imposition of different amount of ujrah on various types of credit cards
that offer different kind of services, benefits and privileges is permissible;
The imposition of ujrah on the services, benefits and privileges which are
not related to qard , deferment of debt and exchange of cash with cash at
a different value is permissible; and
The imposition of ujrah on the services, benefits and privileges relating to
qard , deferment of debt and exchange of cash with cash at a different
value is not permissible. However, charges may be imposed to cover the
actual management cost (nafaqah/taklufah).

Basis of the ruling

Ujrah refers to a fee that is permissible in Islam
based on sources from the verse of al-Quran
and hadith as follows:
Allah

SWT says:
... the best of men for you to hire is the
strong, the trustworthy.
A hadith of Rasulullah SAW provides:
Pay the worker his wages before his sweat
dries off. Surah al-Qasas, verse 26

Muslim scholars opinion about Ujrah

Customers utilization of credit financing given by
bank;
The Hanafis have ruled that any loan that results
in a benefit to the lender is forbidden if the benefit
was stipulated as a condition. However, they ruled
that if the benefit was not stipulated as a condition
and was not expected based on the convention,
there is no harm.
The Malikis ruled that any loan that results in a
benefit to the lender is defective (fasid) since it
constitutes riba thus, it is forbidden to benefit from
any property of the borrower.

 The

Shafiie and Hanbalis also ruled that any

loan that results in a benefit to the lender is
not permitted. There is an example of hadith
of forbidden of loans beneficial which narrated
that Ubay Ibn Kaab, ibn Masud and Ibn
Abbas:-

All forbade any loan that results in a benefit to

the lender al-Sunan al-Kubra

The concept of Ujrah

According to Dr Wahbah al-Zuhayli, the loans
are permitted as a form of charity, where the
lender gives up the usage of the goods for the
period of the loan. Loans are forbidden if they
do not serve such a charitable cause. For
example if the lender gets some benefit out of
extending a loan.
Ibn Abbas narrated a hadith:

"Lending something twice is better than giving

(once and for all) it in charity"

The product of Ujrah

Credit card or better known as Islamic credit card is one of the alternative to
banking products introduced by Islamic financial institutions in Malaysia to
substitute the conventional banking products. Bank Negara Shariah has
been recognized Islamic credit card as the Shariah compliant product by
Advisory Council. It was established by Bank Negara Malaysia under the
Guidelines of Islamic Credit Card dated on 1st August 2004.

On 29th June 2007, Bank Negara reported that, until May 2007, the total
financing given by Islamic banking institutions through the Islamic credit
card product had reached RM577 million. It could be said that Islamic
credit card has played a vital role in the development and success of
Islamic banking in Malaysia.

Generally, a number of products have been adopted to produce the Islamic

credit card in Muslim country which is based on bay al-inah, tawarruq,
hiwalah, ujrah, kafalah and wakalah. The Islamic credit card in Malaysia is
executed by using the contract of bay al-inah, tawarruq and ujrah.

Practice of Ujrah

In the Islamic banking, guarantees are intended to protected obligations and

protect the failure to pay the amount of debts. Such guarantees may take the
form of written documents, attestations, personal guarantees and pledges. The
Shariah scholars of Malaysia and Gulf Cooperation Council (GCC) countries
approve the practise of charging ujrah (fee) for a guarantee.

Shariah scholars of GCC countries are of the opinion that the fee should not
exceed the actual expenses while Malaysian scholars do not stipulate that as a
condition, which means that the guarantor may charge more than the actual
expenses.

Under this structure, the bank manages and maintains the Islamic credit card
facility for the customer and charges fees (ujrah) for the services. Other
contractual principles applicable in the structure are guarantee (kafalah) and
advancement of money (qar).

When the customer uses the card to make purchases, the bank provides a
guarantee to the merchants on payments.

How Ujrah benefited people?

The bank will give the credit facility to the customer through the
credit card account and maintains the credit card facility and
charges the fees (ujrah) for the services. The customer will pay
the charges according to the usage of the card.

Example:The cardholder who pay in full on or before the payment due

date of the previous months statement will enjoy management
charge-free period of 20 days for all retail transactions for current
month only. Furthermore, the cardholders who only partially
settle their previous months outstanding balances on or before
the payment due date will be charged an actual management
charge as per applicable tiered structure for all retail transactions
from posting date of the said retail transactions.

The practice of Ujrah in Malaysia

CIMB

Islamic defines Ujrah concept as

payment in exchange for services, benefits
and privileges offered to the cardholders and
they offered CIMB Islamic MasterCard to its
customer.
Maybank Islamic Berhad also converted the
underlying Shariah principle of all their
Islamic credit cards from the Bai' Inah to
Ujrah concept. Maybank Islamic Berhad
defines Ujrah as payment fee on service in
exchange for services rendered.

Ujrah concept in education

financing

The National Higher Education Fund Corporation

(PTPTN) provides the services, benefits and privileges
to borrower by giving the service (i.e loan) in advance
and the borrower has to pay fee on service in
exchange for services rendered.

Currently, PTPTN has begun implementing education

financing using the Ujrah concept. PTPTN is in the
process of offering the exchange of 3% loan to 1%
Ujrah loan in stages. The loan exchange process
period from 3% & 5% to 1%. The 1% is a flat rate and
will not be burdensome to the borrower to pay back
their loan.

Special Muzakarah (Conference) of the Fatwa

Committee National Council of Islamic Religious
Affairs Malaysia

The Committee have agreed with the service charge imposed by

PTPTN to the students on the concept of ujrah (hire) and the amount
charged must not be burdensome on students.

The PTPTN can impose tawidh (penalty) to those who already have
a job and are financially capable to pay back the loan but intentionally
refuse to repay the loans. For those who are still jobless and are not
financially capable, penalty should not be imposed.

The PTPTN should give rebate (ibra) to students who managed to

completely repay their loans earlier than the agreed date.

Last but not least, they agreed with the proposal to implement the
PTPTN based on the concept of ujra at every level of education and
applicable to all students irrespective of their religion and race.

Practice of Ujrah in other countries

Practice in Indonesia
The

pioneer of the development Islamic credit card in Indonesia is Syariah Division of

Bank Danamon.
On July 18th 2007, a collaborative product between Bank Danamon and MasterCard
launched the first Islamic credit card in Indonesia, called Dirham Card.
Bank Danamon acts as a guarantor (kaafil) for the card holder.
It will guarantee all the payments coming from all transactions which may come from
buy and sale transactions between merchants and card holder or from cash
withdrawal from Bank Danamons ATM or other banks which have strategic
partnership with it.
For example, a card holder bought a bag at Vincci by using Dirham Card. Vincci as the
merchant will confirm to bank Danamon as card publisher. Then, the bank will
guarantee that the customer can pay the price. If the payment time is due, the
customer will pay the price to the bank.
The bank, which offer guarantee of payment, has a right to collect fees (ujrah kafalah).
DSN MUI stated that, cards publisher as the payments service provider the card
holder. For this ijarah, card holder will be charged by the membership fee.

Practice in Brunei
Bank Islam Brunei Darussalam Berhad (BIBD)
is Bruneis largest Islamic financial institution.
BIBD is a full-service bank, providing Islamic
financial services to its entire customer.
BIBD also offers only Shariah Compliant
financing card and in this case, the cardholder
enters a contract with BIBD, allowing the bank
to perform transactions on customers behalf
and the same transaction will apply whereby
the customer has to pay the pay fee on
service in exchange for services rendered.

Conclusion
It

is argued that the high management charges for

the services rendered (Ujrah) which are
benchmarked with the conventional credit cards
does not reflect the actual fees of services.
This high fee shows that Islamic credit card aims
at making revenue and profit and not to become
alternatives to the conventional credit card, but to
compete with it instead.
It is suggested that the applied structures of
Islamic credit card and its operations should be
revised from time to time to make sure that it
complies with the Shariah principle.

Recommendation
Analyzing

the structures of Islamic credit card,

it is suggested that the business operations
and the models should be reviewed from time
to time towards shariah complaint. In light,
diligent shariah complaint inspection and audit
are necessary.
The applied structures of Islamic credit card
and its operations should be revised from time
to time to make sure that it complies with the
Shariah principles.

Thank You