Question:
Is the PayPal Working Capital Cash Advance Shariah compliant?
In the Name of Allah, the Most Gracious, the Most Merciful.
As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.
The Answer:
The PayPal Working Capital Cash Advance is not Shariah Compliant.
The Fiqh (jurisprudence of the answer):
This scheme has an element of Ribā. One receives a loan from PayPal and repays capital plus a fixed fee. The fixed fee is the cost of financing and is part of the counter exchange beyond the capital. Therefore, when one repays PayPal, he repays the capital plus the fixed fee of the same denomination. This is Ribā.
Although this scheme says there is no interest, it is negating simple interest and compound interest[1]. Ribā is more than just simple interest and compound interest; Ribā is an unjustified excess in a bilateral contract which is stipulated for one of the two transacting parties and is without consideration[2].
To elaborate, there are two types of Ribā:
1) Ribā an-Nasī`ah is the advantage and excess gained without consideration by deferring delivery of any homogenous counter exchanges. This excess manifests upon default or delay in payment where time is factored as a consideration[3].
2) Ribā al-Faḍl is a contractually agreed excess in units without any consideration in an exchange of homogeneous goods.[4]
Shariah has not considered money to be a commodity but a medium of exchange. When money of the same genus is exchanged, it must be on spot and in equal quantity. Exchanging different amounts at different times brings into effect both forms of ribā: Ribā al-Nasī`ah and Ribā al-Fadhl.
The Wisdom of the Law:
Note: The law is not based on wisdoms. The wisdoms are some benefits of the law. It is possible that not all said wisdoms are found at a given time. The absence of any or all wisdoms will not change the ruling or law. The law is not deduced nor determined through wisdoms. Wisdoms are enumerated to complement rationale minds.
Only a person who has a need borrows money. The need can be economic, business related or personal. Thus, lending is an act of charity helping those in need. Shariah has deemed lending as charity and not a form of business. Hence, profiting from lending by means of getting more in return of lending is totally prohibited as need is being commodified and thus, the borrower is exploited and disadvantaged. This conflicts with one of the fundamental principles of Islamic commercial law, namely, equal opportunities (musāwāt). The commodification of need is oppression and wickedness fuelled by greed. Where capitalism thrives on commodification, Shariah on the other hand, prohibits unrivalled and unrestricted commodification. Such behaviour at a macro level creates wealth inequality and disparity. Furthermore, the mass availability of credit with cost promotes debt and debt creation – unhealthy at a micro and macro level.
And Allah Ta’ālā Alone Knows Best
Mufti Faraz Adam
www.darulfiqh.com
DISCLAIMER:
The views and opinions expressed in this answer belong only to the author and do not in any way represent or reflect the views of any institutions to which he may be affiliated.
Arguments and ideas propounded in this answer are based on the juristic interpretations and reasoning of the author. Given that contemporary issues and interpretations of contemporary issues are subjective in nature, another Mufti may reach different conclusions to the one expressed by the author. Whilst every effort has been taken to ensure total accuracy and soundness from a Shari’ah perspective, the author is open to any correction or juristic guidance. On the event of any juristic shortcomings, the author will retract any or all of the conclusions expressed within this answer.
The Shari’ah ruling given herein is based specifically on the scenario in question. The author bears no responsibility towards any party that acts or does not act on this answer and is exempted from any and all forms of loss or damage. This answer may not be used as evidence in any court of law without prior written consent from the author. Consideration is only given and is restricted to the specific links provided, the author does not endorse nor approve of any other content the website may contain.