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
 
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