Understanding Islamic Finance - Doha Academy of Tertiary Studies

Financing Principles and Practices 381allowed to pay off the debt in instalments. IFIs can charge the card holder membership fees,renewal fees and replacement fees. They can also charge a commission from the merchantsaccepting the card in the form of a percentage of the purchase price of the items and servicesavailed using the card. Islamic banks and financial institutions can take membership ofinternational card regulatory organizations, remaining within the limits of the Sharī´ah, andpay membership fees, service charges and other fees to them, as long as these do not includeinterest payments, even in an indirect way, such as in the case of increasing the servicecharge to cater for the granted credit.A card holder can withdraw cash within the limit of his available funds, or more with theagreement of the institution issuing the card, provided no interest is charged. The issuinginstitution can charge a flat service fee for cash withdrawal, proportionate to the serviceoffered, but not a fee that varies with the amount withdrawn.IFIs cannot grant the card holder privileges prohibited by the Sharī´ah, such as conventionallife insurance, entrance to prohibited places or prohibited gifts. They can grant privilegesthat are not prohibited, such as a priority right to services or discounts on hotel, airline orrestaurant reservations and the like. Thus, possible features of a Sharī´ah-compliant creditcard may be the following:• an annual fee charged for issuing the card in order to cover expenses related to cardissuance and usage;• an interest-free revolving credit line;• the card confers on its holder the right to pay for goods or services purchased up to acertain limit;• a cash limit provided for emergency cases;• a percentage commission from merchants accepting the card;• the card holder to repay a certain amount of principal every month and the remainingamount is deferred to the next month with no interest charged;• a penalty levied as a deterrent against defaults for charity;• the card holder must not use the card for purposes prohibited by the Sharī´ah.Structures of Islamic Credit Cards Currently in UseCredit Card of Emirates Islamic BankThis card is based on Ujrah or a service charge. A yearly service charge is levied dependingon the credit card type, which is payable on a quarterly basis. The EIB credit card isnot the same as a charge card. It allows a customer to pay a minimum monthly amountof 10 % of the outstanding balance (a minimum payment of UAED 100), as opposed toa charge card, where the full amount is payable on the due date. It offers the followingbenefits:• free card delivery;• free supplementary cards;• a free EIB account with no minimum balance requirement;• settlement by cash/cheque or direct debit to the EIB account;• worldwide acceptance;• a 100 % cash advance facility;• free online access;