{"id":3195,"date":"2021-06-23T06:53:29","date_gmt":"2021-06-23T06:53:29","guid":{"rendered":"https:\/\/blog.ethis.co\/?p=3195"},"modified":"2022-11-15T08:05:53","modified_gmt":"2022-11-15T08:05:53","slug":"bnpl-shariah-compliant","status":"publish","type":"post","link":"https:\/\/ethis.co\/blog\/bnpl-shariah-compliant\/","title":{"rendered":"Buy Now Pay Later (BNPL): Shariah Compliant?"},"content":{"rendered":"\n

By Mufti Ismail Desai, CEO, Global Islamic Financial Services Firm <\/strong><\/p>\n\n\n\n

Buy now pay later (BNPL) schemes have seen tremendous growth globally including in Australia, USA, the UK and other countries. Traditional consumers have long had the opportunity to purchase goods and services and pay for them in instalments over a term. Traditional store lay-by arrangements allow consumers to pay for purchases over time, and some retailers have offered interest-free or deferred payment options for many years. In recent years, newer types of electronic instalment payment arrangements \u2013 known as \u2018buy now, pay later\u2019 (BNPL) services \u2013 have become more prominent, as the use and acceptance of these services have grown tremendously.<\/p>\n\n\n\n

BNPL services enable consumers to purchase goods and services by paying part of the purchase price at the time of the transaction and the remainder to the BNPL provider in a series of instalments. Unlike traditional lay-by, the customer receives their purchase immediately and the merchant is paid up front by the BNPL provider. In most cases, customers use a mobile app to access these services and repayments are drawn from a customer’s linked debit or credit card. Certain BNPL firms offer service free charges if all instalments are paid on time. Such BNPL services are mostly accessed online with some firms offering in store purchases. These services are also offered through virtual cards. <\/p>\n\n\n\n

We believe there are significant opportunities for BNPL within an Islamic Finance context as this growing industry is estimated to be worth US$2.8 trillion, and is projected to grow to  US$4.8 trillion by 2024 (BNY Mellon). BNPL can be used as effective financial tool in generating tremendous financial value for Muslim consumers globally. <\/p>\n\n\n\n

The following diagram depicts a traditional BNPL scheme financial model:<\/p>\n\n\n\n

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Table of Contents<\/p>\n