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MUI East Java bans 'buy now, pay later' contractual scheme
The edict commission of MUI East Java has raised issue with the buy and sell agreement connected to the "pay later" digital payment facility, declaring it as haram because it charges interest.
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A man browses products on a mobile online shopping app on June 16, 2022 in Jakarta. (Antara/Muhammad Adimaja)
T
he East Java chapter of the Indonesian Ulema Council (MUI) has declared as haram the contractual system behind the buy now, pay later (BNPL) financing option following a meeting in Surabaya last week.
Often shortened to “pay later” on e-commerce platforms and shopping apps, the facility allows online consumers to purchase goods and pay for them in usually interest-free installments installments over a period ranging between one month and up to a year.
Muslimin, secretary of MUI East Java’s edict commission, clarified that the council did not consider the BNPL system as a whole to be haram, but rather the facility’s contractual agreements for merchants.
“The ‘pay later’ method contains two different contracts, a buy and sell [agreement] and a debt contract. We have declared the debt contract as haram because it [charges] interest upfront,” Muslimin told The Jakarta Post on Monday.
The BNPL facility has been growing in popularity as an increasing number of online shoppers opt to defer their payments amid pandemic-induced financial constraints.
Muslimin said that if the payment service providers offering BNPL replaced the interest charge with an administrative surcharge, then it would be acceptable.
“For example, if I buy goods and I live far from the seller, it is acceptable that I pay more [...] administrative fees. A contract setting [an interest charge] and a contract setting an administrative fee are two different things,” he added.
