AI DRIVEN ISLAMIC BUY NOW PAY LATER (BNPL) – A LEGAL ANALYSIS
DOI:
https://doi.org/10.22515/jmif.v3i1.6671Keywords:
Buy Now Pay Later, Islamic Finance, International Islamic Financing, Legal Analysis, MurabahaAbstract
Buy Now Pay Later (BNPL) schemes have experienced worldwide rapid growth rates in order to stimulate consumption growth and provide consumers with more options in paying for their items. Traditional consumers were offered for a long time offers where they may purchase products and services and then pay them off over a period of time. BNPL schemes are a new form of electronic installment payment arrangements that permit the purchase of even smaller items and pay them off over a period of time. While installment options were mostly restricted to larger purchases, such as cars and furniture, newer BNPL enable to purchase efficiently even less expensive goods and services. This change in opportunities has attracted merchants and financial services provider in Islamic countries to evaluate BNPL for their business and provide it to their consumers. Islamic law has various forms of contracts that may be utilized for BNPL scheme. However, the most common form is the structure of a Murabaha for financing these schemes. The article outlines the general BNPL structure for Islamic finance and the legal issues that arise from general BNPL schemes. Ensuring the solid connection between goods and services and the financing is paramount for maintaining compliance with Shariah law. The legal analysis outlined several structures that are suitable for BNPL schemes that are Shariah compliant, enabling Islamic finance to strengthen the sector and provide dedicated financing options.
Downloads
References
Alcazar, J., and T. Bradford. 2021. "The appeal and proliferation of buy now, pay later: Consumer and merchant perspectives." The Federal Reserve Bank of Kansas City 10.
Bilal, M., and A. K. Mydin Meera. 2015. "Al-Muqassah model: An alternative Shariah-compliant Islamic credit card model for Islamic financial institutions in Malaysia." International Journal of Islamic and Middle Eastern Finance and Management 418-438.
Di Maggio, M., E. Williams, and J. Katz. 2022. "Buy now, pay later credit: User characteristics and effects on spending patterns." National Bureau of Economic Research w30508.
Fisher, C., C. Holland, and T. West. 2021. "Developments in the Buy Now, Pay Later Market." Reserve Bank of Australia Bulletin.
Gerrans, P., D. G. Baur, and S. Lavagna-Slater. 2022. "Fintech and responsibility: Buy-now-pay-later arrangements." Australian Journal of Management 47 (3): 474-502.
Hussain, M., A. Shahmoradi, and R. Turk. 2016. "An overview of Islamic finance." Journal of International Commerce, Economics and Policy 1650003.
Kahf, M. 2013. Islamic finance contracts. Al Manhal.
Katterbauer, K., and P. Moschetta. 2022. "A deep learning approach to risk management modeling for Islamic microfinance." European Journal of Islamic Finance 9 (2): 35-43.
Katterbauer, K., and P. Moschetta. 2022. "A robo-advisory framework for Islamic and Environmental, Social and Governance (ESG) compliance–A benchmark study on the S&P 500 stock index." The Journal of Muamalat and Islamic Finance Research 34-46.
Katterbauer, K., and P. Moschetta. 2022. "An innovative artificial intelligence and natural language processing framework for asset price forecasting based on islamic finance: A case study of the saudi stock market." Econometric Research in Finance 6 (2): 183-196.
Katterbauer, K., H. Syed, and L. C. de Kiev. 2022. "An innovative AI Blockchain framework for Islamic microfinancing." Journal of Islamic Finance 11 (1): 67-80.
Katterbauer, K., H. Syed, L. Cleenewerck, and S. Y. Genc. 2022. "A Distributionally AI Robust Islamic Portfolio Approach-A Case Study of The Impact of Sanctions on The Incorporation of Chinese Stocks into Islamic ETF." Journal of Islamic Finance 11 (1): 41-50.
Katterbauer, K., H. Syed, L. Cleenewerck, and S. Y. Genc. 2022. "Robo-Sukuk pricing for Chinese equities." Borsa Istanbul Review 854-860.
Katterbauer, K., Hassan Syed, and L. Cleenewerck. 2022. "Financial cybercrime in the Islamic finance metaverse." Journal of Metaverse 56-61.
Mirakhor, A., and I. Zaidi. 2007. "Profit-and-loss sharing contracts in Islamic finance." Handbook of Islamic banking 49 (1): 2-37.
Saudi Central Bank. 2023. SAMA Permits Buy Now, Pay Later Company. March 16. https://www.sama.gov.sa/en-US/News/Pages/news-833.aspx.
Schoon, N. 2008. "Islamic finance–an overview." European Business Organization Law Review (EBOR) 9 (4): 621-635.
Shamsuddin, Z., and A. G. Ismail. 2013. "Agency theory in explaining Islamic financial contracts." Middle-East Journal of Scientific Research 15 (4): 530-545.
Downloads
Published
Issue
Section
Citation Check
License
Copyright (c) 2023 Klemens Katterbauer, Hassan Syed, Sema Yilmaz Genc, Laurent Cleenewerck
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
Authors who publish with this journal agree to the following terms:
- Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution License that allows others to share the work with an acknowledgement of the work's authorship and initial publication in this journal.
- Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgement of its initial publication in this journal.
- Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work.
