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Comment by JCharante | Hacker News Reader

I'm intrigued by how they (almost?) classified digital wallets as haram due to the cash back benefits which can act as a form of interest payment between businesses.

Do normal credit cards there not have cash back benefits? Do credit cards exist or because naturally they would charge you interest, do they not exist? It's interesting how there's a whole different ecosystem of apps in the part of the world that most of the world lives in.

Digital wallets must not be something akin to the Discover or Charles Schwab app on your phone, I recall hearing about them because there was an MLM ponzi scheme in Vietnam recognized last month where users would receive 80% cashback on paying bills and you'd receive more depending on how many friends you onboarded (with the app having a $100 minimum deposit to open an account). I don't know how that doesn't instantly seem too good to be true, then again I guess MoviePass seemed too good to be true.

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> Do normal credit cards there not have cash back benefits? Do credit cards exist or because naturally they would charge you interest, do they not exist? It's interesting how there's a whole different ecosystem of apps in the part of the world that most of the world lives in.

I'm not familiar with how credit cards work there, but from my point of view cash-back benefits aren't all that widespread. Aside from AmEx I'm not familiar with any such arrangement available in France. And even AmEx is pretty much a joke, you'd have to spend an enormous amount of money every year just so that cashback could reach the price of the card.

That's because credit card interchange fees are much lower in France than they are in the US. Does the French government cap interchange fees?

https://www.mastercard.co.uk/content/dam/mccom/en-gb/interch...

https://www.mastercard.us/content/dam/public/mastercardcom/n...

There is a cap set by the EU since 2015

https://www.adyen.com/blog/all-you-need-to-know-about-the-eu...

Everything makes sense now. 0.3% is an order of magnitude lower than the fees paid by US merchants.

I mean, irrespective of the reasons, banning cash back is good. It's a really parasitic part of the modern economic system. You make people play these games to increase their spending, and the end result is the people who don't play these games get punished the most by paying more.

The banking system in Indonesia is predominantly conventional, not syariah. Credit card penetration is low but its more to do with credit risk than religious reasons. They operate as they do elsewhere.

The digital wallets are stored value. So kind of like a very limited bank account. Without registering your ID you can put money in there and purchase things online or at point of sales. With extra KYC (Your ID etc) you can store more money in there and transfer it to friends. But the limits are small (<$300) even for the KYCd accounts.

The digital wallets themselves though are in general part of large "super" apps, kind of like uber + supermarket delivery + parcel delivery and a whole host of other services. Big players include Gojek & Grab, which started as ride-hailing.

The cashback is to attract new users, its pretty rare nowdays though as the wallets tighten their belts. You used to get cashback at point of sale, but it was never a huge amount (typically $2-3). The general idea was to use cashback to encourage daily usage, gradually weaning people off them as they started to become dependant on the other services I mentioned.

Credit card charges interest, and any kind of interest is considered usury/riba and it is forbidden. Loan was supposed to be social activities where the other party should not benefits anything from it. If they want to provide money and gain profits, then they can do the investment contracts, which means now there’s a possibility of loss for the investor. This is halal and considered as a partnership.

Digital wallet is recognized as such: 1. User “lend” money to the digital wallet provider when they top up, say $100 2. The money is used for any kind of things as it enters the circulation of the wallet provider, it could be invested, it could be loss 3. When wallet provider provides cashback, say they spent $100 then they obtained back $10 4. The $10 is considered as interest because now the user have $110 on their wallet (the $100 already spent though) - despite they only “lend” the wallet provider $100.

Conventional bank and conventional credit cards exist in Indonesia, some provides cash back and other kind of rewards. So yes, it does exist.

What a load of baloney analogy and argument. No one "lends" Money when they deposit their cash in the wallets. Wallets are just that, wallets. You simply don't understand cashback. Its not "interest". Its residual fees earned from selling your data to aggregators where in huge quantities it makes sense to quantify the rewards in percentage points. Besides, don't credit card companies charge transaction fees? So if they give you say 10% of your fees back as cashback, is that interest?

Does the Arabic word "riba" mean interest or excessive interest? Interest being 1-10% example and excessive one being upwards of 36%?

One question that no one is able to answer me, how does doing business, investing time and skill earn you "profit" while spending that same time and skill in investing your money and getting rewards is called "interest" and that gets shot down?

For someone who has spend some time trying to wrap my head around the Islamic banking concept, all I have come to understand is that this is just a feel good scheme to bring Muslims into the conventional banking fold by any means necessary.

> One question that no one is able to answer me, how does doing business, investing time and skill earn you "profit" while spending that same time and skill in investing your money and getting rewards is called "interest" and that gets shot down?

The difference is profit/loss guarantee. If as OP said you invest your money, you are bound by risk of either losing your money or making a profit. On the other hand, your money sitting on the bank account earning interest while you are not at risk of losing, but only of profiting is considered haram.

do you know about the 2008 crash? the foreclosures? the banks folding? the peoples deposits vanishing? in india, the law is clear on this. if you have any amount in a bank as savings or deposits or whatever and the bank folds, you are only insured up to Rs. 100k or us$ 1300. although that limit is being revised to 5 times. still.

https://www.livemint.com/news/india/just-how-safe-is-your-ba... https://www.telegraphindia.com/india/pmc-bank-crisis-money-s...

please tell me how do you see this as "only of profiting is considered haram"?

I wrote in the earlier comment, unless you have done work with banks, eveyone says there is 0 risk to lender but that is just false. why does the word foreclosure exists with banks? and debt collectors? the premise of halal banking is wrong. write it as shariah compliant banking and i will be happier, i will still NOT work with it though because it is just sneaky.

look dude, i am a professional who has to work with businesses as his day job and been doing that for years. let me tell you unless there is some tragedy or accident, a business is guaranteed to earn profits. its not speculation that you dont know if you will flip your money 2x or loose it all. that is gambling. real businesses is pushing profits up day in and out.

Halal is just another word for sharia compliant. If it is against islamic law (sharia), then it is not halal (haram). Halal certification is a different thing.

When you deposits money, bank might offer you annual interest of 1%. No matter what happened, whether the bank is at loss or not, you get the 1%. This is riba. If the purpose of the deposits is to be used as investment, then it must be clear from the beginning and there would be risk of loss.

When bank lend money to a person, bank asked for an interest of say 5%, bank does not care if the person is profiting or not, they will get their additional 5%. This is riba. Lending in islam is a social activity and no profits should occur from it. Would there be risk for lender? Yes. Would it means they can profits from it? In Islam, No.

I am not confident with the premise that you said a business is guaranteed to earn profits. I’ve seen business rise and fall, pre covid and after covid. I’ve started some of my own business and some got profitable and some doesn’t, some were profitable in the beginning, some started to see declines.

I don’t understand what is sneaky about sharia law for banking, it prevents anyone from being unfair and that anyone know the risk from a transaction, and that no one should profits from their partner loss and that loan shall not be profitable.

The argument is not from me, but from scholars and religious researcher and I am just forwarding it on HN. The money you put on your digital wallet should not magically increase. It should be like your physical one. When you put $100, that’s what you get. When you put $100 and you get $110 without trade is riba. When you buy $100 for $110 is riba. Riba is when money magically appears without any effort/business. When you put money into a wallet, the terms is that you just want to store it, you don’t want the wallet to somehow circulate your money into investment, that’s not wallet, thats bank. If it is the business you do the deal with that provides cashback (you buy meat and the meat store give you 10% discount or 10% cashback) then it is allowed as they are the first party who were part of the transaction, you don’t “lend” them money at all.

Credit card that charges interest/fee is already considered riba in Islam, no need to go into the cash back situation as it is already forbidden in the first place.

The Al Quran clearly answers your questions. “God forbids riba and permitted trade/business”. Riba had 0 risk for the lender, while investment/trade/business has risk. It is unfair to invest but only wanted profits, in business there’s a risk of loss, and there’s a chance of profits. Investing time and skills, or money for other business is allowed. No one would label it riba. When you starts being unfair by investing and you wanted only profits in return, without risk of loss - then that’s loan, not investment.

The etymology definition of riba is interest, but the actual ruling around it and the law is very complex.

I agree that some financial institutions are just using the label Sharia and Halal while in actualities it is just conventional banking.

Credit cards involve interest and thus are haram. Charging interest and paying interest are both haram.

> It was narrated that from 'Ata' bin As-Sa'ib, from Ash-Sha'bi who said: The Messenger of Allah [SAW] cursed the one who consumes Riba, the one who pays it, the one who writes it down, and the one who withholds Sadaqah (Zakah). And he used to forbid wailing (in mourning for the dead).

Sunan an-Nasa'i 5105

It is still forbidden if that card has a introductory 0% APR or you intend to pay the balance in full because you are signing a contract which can required you to pay riba.

https://islamqa.info/en/answers/13725/using-credit-cards-is-...

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