The Shariah Advisory Council (SAC) of Bank Negara Malaysia at its 201st meeting and 26th special meeting on 29 January and 30 January 2020 has made a ruling that electronic money (e-money) is a permissible payment instrument under Shariah, provided that the e-money has to be structured based on appropriate Shariah contract(s) to preserve the rights and obligations of the contracting parties.
One of the applicable Shariah contracts for e-money is the agency contract (wakalah), whereby the approved issuer acts as an agent to make payment on behalf of the user (wakil bi ad-daf`i) to the merchant. Therefore, the funds received from the user shall be placed in a Shariah compliant trust account or a dedicated deposit account as required pursuant to section 137 of the Islamic Financial Services Act 2013 (IFSA). An approved issuer is required to comply with the Guideline on Electronic Money (the Guideline) issued by Bank Negara Malaysia (the Bank) dated 31 July 2008 (including revisions from time to time). This includes, amongst others, the requirement on utilisation of the funds for investment purpose and any return generated belongs to the approved issuer, subject to the condition set forth in the Guideline. In this regard, the funds may be construed as a form of loan (qard) from the user to the approved issuer.
Since the approved issuer acts merely as an agent to facilitate payment on behalf of the user to the merchant, it is the user’s responsibility to ensure that the e-money is used for Shariah compliant transactions.