Al-Muqassah model An alternative Shariah-compliant Islamic credit card model for Islamic financial institutions in Malaysia

Purpose – The purpose of this paper is to develop a new Islamic credit card model that is in line with Shariah principles and can be adopted as an alternative to contemporary Islamic credit card models by Islamic financial institutions in Malaysia. Design/methodology/approach – This paper is theoretical in nature and mainly based on descriptive research method approach. Findings – The overall findings indicate that the contemporary practice of Islamic credit card in Malaysia is still controversial in its design and operation. Moreover, the adoption and practice of Shariah contracts in bay’ al-inah, tawarruq and ujrah models are not in line with fundamental doctrines of Shariah and are imbued with the practice of hilah (legal trick), which allows them to circumvent the prohibition of riba. The paper indicates that Al-Muqassah model possibly has a comparative advantage in design and operation when compared with the bay’ al-inah, tawarruq or ujrah models. Research limitations/implications – The paper is limited to develop a new Shariah-compliant Islamic credit card model. The paper presents a design and defines the underlying Islamic financial contracts and their working mechanisms in the proposed model. However, it will not address other related areas like consumer perception, legal and regulatory requirements. Practical implications – The paper will have direct implications on contemporary practice of Islamic credit card in Malaysia and elsewhere. The practice of Al-Muqassah model can also possibly have effects on common well-being and economic development. Originality/value – The paper has relevance for Islamic financial institutions offering Islamic credit cards. The proposed model is fully in line with fundamental doctrines of Shariah and performs the key functions of an Islamic credit card.