If a Muslim chooses not to use a shariah compliant bank or payment method, they may be engaging in a financial activity that is not in accordance with Islamic law. This could lead to their wealth being considered unlawful by Islamic standards, which may have spiritual consequences for them. Additionally, using conventional banks or payment methods may involve interest payments or other practices that are considered forbidden in Islam. Overall, it is recommended for Muslims to use shariah-compliant financial institutions and payment methods to ensure their financial transactions are in line with their religious beliefs.
According to the Quran, engaging in financial activities that are considered unlawful by Islamic standards (such as paying or receiving interest) is regarded as a major sin. The Quran identifies such practices as resembling war against God and His Prophet (Quran 2:278-279) and warns of severe consequences in the hereafter (Quran 2:275-276).
Conversely, using shariah-compliant financial institutions and payment methods is regarded as a way of fulfilling one’s religious obligations as a Muslim. The Quran encourages conducting business transactions in a manner that is just and fair, and it prohibits any form of exploitation or deception in financial dealings (Quran 2:188, 4:29).
Overall, the religious implications of using conventional banks or payment methods versus shariah-compliant ones are significant, as they relate to issues of obedience to God’s laws, avoiding sin, and fulfilling one’s religious obligations.
PayHalal is considered to be a good solution for Muslims to pay and receive money because it is a shariah-compliant platform that adheres to Islamic principles in its financial transactions. Here are some reasons why PayHalal is a good solution for Muslim consumers:
1. Shariah-Compliant: PayHalal ensures that all financial transactions on its platform are shariah-compliant, meaning they do not involve interest payments or any other practices that are considered forbidden in Islam.
2. Halal Certification: PayHalal has obtained halal certification from prominent Islamic authorities, confirming that its services are in line with Islamic principles.
3. Transparency: PayHalal provides transparent information on its fees and exchange rates, ensuring that users have clarity on the costs of their transactions.
4. Ease of Use: PayHalal’s platform is user-friendly and easy to navigate, with features that allow users to make payments and transfers quickly and securely.
5. Customer Support: PayHalal offers strong customer support to address any concerns or issues that users may have, ensuring a positive experience for its customers.
Overall, PayHalal is a good solution for Muslims who want to conduct their financial transactions in a shariah-compliant manner, while also enjoying the convenience and security of modern-day electronic payments.
PayHalal’s emphasis on management of non-compliance issues reflects the importance of maintaining customers’ faith and confidence in shariah-compliant financial institutions. This is crucial because such customers expect their financial transactions to adhere to Islamic principles and they place a high degree of trust in these institutions.
One of the main ways PayHalal ensures compliance is by monitoring SNC (Shariah non-compliant) events on a continuous basis. This includes having a team of shariah experts that regularly assesses the platform’s operations, products, and services to ensure they align with shariah principles. This helps to identify shariah non-compliant events or potential risks, which the company can then address and rectify in a timely manner.
Additionally, PayHalal ensures transparency in its compliance measures, which further establishes credibility with its customers. This includes publishing information on its shariah compliance procedures, obtaining halal certification from credible Islamic authorities, and openly addressing any shariah non-compliance issues when they arise.
Overall, PayHalal’s emphasis on management of non-compliance issues through continuous monitoring and transparency plays a vital role in ensuring customers’ trust and faith in shariah-compliant financial institutions. This in turn helps to boost the credibility and reputation of Islamic banking / finance and payment.
Elements of Shariah Non-compliance Risks
A Shariah compliant financial product should be free from prohibitive elements, namely riba (interest), gharar (uncertainty), ghubn (inequality), ikra (duress), ghalaṭ (mistake), taghrir (deception), jahalah (ambiguousness). These elements need to be fully apprehended by Islamic banks in order to carry out an effective Shariah risk management (Hassan, 2016). The following list summarises the elements that can bring possibility of SNC event:
1. Riba relates to the loan contract that the conventional banking adopted nowadays. They charge interest with specific increase on the amount of money that the customer borrowed in a given time period. It is also forbidden to obtain unfair gain in the exchange between commodities on the spot. The exchange of currencies and commodities, included in the six ribawi items (gold, silver, barley, wheat, dates and salt) stated in the hadith are considered as riba. If the Islamic bank fails to eliminate the element of interest and unfair gain by either party in its products and services, they will be exposed to SNC risk.
2. The transactions that involve minor gharar in the contract and execution will not render the contract null and void. Moreover, the transactions that involve excessive amount of gharar may deem the contract to become null and void as it may lead to the occurrence of potential SNC (Shafii et a., 2010).
3. Taghrir is fraud or cheating. For instance, a seller intentionally presents a misleading fact about the product to deceive the buyer to enter the contract. This can lead to SNC as it breaches the fundamentals of Shariah principles that require any transaction to be based on mutual consent of both parties (Lahsasna, 2014).
4. Ghubn in Islamic financial transaction means an inequality of the product value in a cumulative contract due the ignorance by both contracting parties (Lahsasna, 2014). In the event when excessive ghubn exists in the contract, it may invalidate the contract as it is considered as a deception by one party to induce the other party to enter the contract.
5. Ikrah refers to a threat done by one party to force another party to enter the contract. The ikrah or duress may cause the contract to become invalid and lead to SNC (IFSB, 2016).
6. Ghalat is a mistake that takes place in a transaction contracts due to false prediction and assumption about the product or subject matter (Lahsasna, 2014).
7. Jahalah or ambiguousness on the subject matter may lead to dispute between the parties. Therefore, Islam required the seller to provide appropriate information and sufficient details regarding the subject matter to the buyer. Excessive ignorance in any transaction executed refutes mutual consent of the contracting parties, and it will render the contract as null and void (Hassan, 2016).
8. Ahliyyah refers to the legal capacity of a person to enter a valid contract. The person should be able to be held accountable and reaches age of criminal responsibility; otherwise the contract is deemed as void (IFSB, 2016).
PayHalal reduces Shariah non-compliance risk through several measures, including:
1. Shariah-Compliant Procedures: PayHalal utilizes Shariah-compliant procedures and principles in all of its transactions, ensuring that users can conduct their financial activities in accordance with Islamic law.
2. Shariah Advisory Board: PayHalal has its own Shariah Advisory Board comprising of prominent Shariah scholars who provide expert guidance to the company on all Shariah-related matters, including compliance issues.
3. Continuous Monitoring: PayHalal conducts regular internal Shariah audits to identify and address any potential non-compliance issues. This includes ongoing monitoring of its products, services, and operations to ensure they are in compliance with Shariah principles.
4. Halal Certification: PayHalal has obtained halal certification from credible third-party Shariah advisors, confirming that its services are in line with Islamic principles.
5. Compliance Reporting: PayHalal provides regular compliance reports to its stakeholders, which include updates on its Shariah compliance activities and any action taken to address non-compliance issues.
Overall, PayHalal’s focus on Shariah compliance through various measures reduces the risk of Shariah non-compliance, providing assurance to its merchants that their financial activities are being conducted in a manner that is consistent with Shariah principles. This also helps to build trust and confidence among users, which is essential for the growth and sustainability of Islamic banking and finance.
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