Inquiry Regrading BNPL Services

In the Name of Allah, the Most Gracious, the Most Merciful.
As-salāmu 'alaykum wa-rahmatullāhi wa-barakātuh.

Brother in Islam,

You enquire regarding the use of the Tamara and Tabby "Buy Now, Pay Later" services available in Saudi Arabia, wherein the company pays the full amount to the merchant on behalf of the customer, the customer repays the company in installments without any increase, and the company earns a commission from the merchant. You have attached the Shariah certifications of both companies.

At the outset, it is important to note that a ruling on any financial product rests on three factors: the concept, the contracts, and the implementation. Without reviewing the actual documents used by these companies, we would not be in a position to comment on the contracts and their implementation. However, based on the certifications available online, namely the resolutions of Tamara's Shariah Committee (Sheikh Dr. Yūsuf al-Shubaylī, Sheikh Dr. Sa'd al-Khathlān, and Dr. Khālid al-Sayyārī) and the opinion issued for Tabby through the Shariyah Review Bureau (Sheikh Dr. Khālid al-Muzaynī and Sheikh Dr. Ṣalāḥ al-Shalhūb), these Shariah committees can be relied upon, particularly as their approvals are coupled with mandated periodic Shariah audits on implementation.

For general understanding, the following may be helpful. Both companies offer two products: a BNPL service and longer-term financing.

In principle, paying a person's debt when one is not indebted to that person is categorized in Shariah as Ḥawālah Muṭlaqah. The company pays the merchant on the client's behalf and thereafter collects from the client exactly the amount it has paid. The scholars have allowed the collection of a fee for this service, so long as the fee is limited to actual costs incurred. Accordingly, this is what is referred to in Resolution (004) of Tamara's Shariah Committee, which restricts the processing fees to direct costs paid to third parties, prohibits linking them to the amount or term of the financing, and prohibits any excess over actual cost. As for the commission taken from the merchant, this is permissible as it is in consideration of the benefit the merchant obtains through increased sales, on condition that the merchant sells at the same price as his cash price, as resolved by the International Islamic Fiqh Academy in its Resolution 108 (2/12), which the committee's resolutions expressly adopt.

As for the longer-term financing, the mechanism utilized is Commodity Murābaḥah, or Tawarruq. In this arrangement, liquidity is created by purchasing commodities on the market, selling them to the client at a deferred price, and thereafter acting as the client's agent to sell the commodity for cash. The permissibility and conditions of these contracts, namely that the company take ownership and possession of the commodity before selling it to the client, that the commodity not be bought back by the company (bayʿ al-ʿīnah), and that no late-payment charges be levied, are mentioned in Resolution (003). As per these documents, there is due care to ensure correct ownership measures are in place.

In light of the above, your queries are answered as follows: (1) It is permissible to use these services. (2) and (3) The structure is a combination of a loan contract without increase and a service contract with a third party, and the detailed reasoning is as set out above. (4) As per the certifications, no interest or late-payment penalties are charged in these products, so the concern does not arise; nevertheless, we advise the customer to remain punctual in payment and not to take on installments beyond his means, as the prompt settlement of debts is an emphasized obligation.

Accordingly, the products, on account of the fatwas of their Shariah board and the accompanying Shariah oversight of implementation, are something one can benefit from. The concepts utilized are well-grounded in Shariah and are widely used methods.