Q&A (Fatwa)

#1093: Mobile Financial Service Businesses: Ruling In Islam

بسم الله الرحمن الرحيم

الحمد لله رب العالمين والصلاة والسلام على رسول الله صلى الله عليه وسلم وعلى آله وصحبه أجمعين ومن تبعهم بخير إلى يوم الدين و بعد

Assalamu Alaykum Warahmatullah Wabarakaatuh

Honored brothers and sisters in the Din, You are welcome to this morning’s session of the Halqah Session Where we shall be dealing with a topic and a matter about which we have received numerous questions. And this topic is on Financial Services or Payment Service Banking.

Examples of questions we have received on this topic are the following:

Asssalamu’alaykum warahmatullah ya sheikh please what’s the islamic ruling on paga business since its related to banks

Assalamu Alaikum. Pls I need more explanation of POS business, haram or halal???? JazakAllahu Khairan



We shall respond to this matter in 4 sections.

The first, On Credit Transfer and the Ruling of same

By this we mean transfer of debt from one person to another in lieu of a debt owed to him by the one to whom the debt is transfered.

This in the Shar’iah is known as Hawwaalah and is a matter treated in Fiqh.

It’s scenerio:
Sulayman owes a thousand naira to Abdullah. At the same time, Uthman owes a thousand naira to Sulayman. Then, Sulayman transfers his debt to Abdullah to Uthman and asks Abdullah to pick his credit of a thousand naira from Uthman.

The Fuqahaa of Islam are in consensus of the permissibility of this form of transaction without exception to our knowledge. The reason: it is a form of easening of things and a permissible interaction between people.

Except that Hawwaalah in this form has its Pillars and conditions without which the transaction is not acceptable or existing in principle. There are several forms of Hawwaalah though. There is a scenerio where the one to whom the debt is transfered is not actually indebted to the one who transferred the debt to him.

In the example we quoted above, it is possible that Uthman does not owe Sulayman but Sulayman still transfers the debt he owes Abdullah to him. This is also permissible provided Uthman accepts to that and is in a better financial situation than Sulayman, according to majority of the Fuqahaa.

Of the general conditions of Hawwaalah are the following:

1. That the primary debtor (the one who transfers his debt), the secondary debtor (the one to whom the debt is transferred) and the Creditor (the one whose payment was transfered to the secondary debtor) are all reached the age of puberty and are of age to carry out contract in the Shar’iah and in accordance with the custom of the People. In a scenerio where one of them is a minor, according to the majority, this transaction will be void.

2. That the one to whom the debt is transfered is in a better economic situation than the one who transfered the debt to him. Otherwise this transfer of credit may not be useful in the end and he may not be able to pay

3. The majority of the Fuqahaa hold that the permission and acceptance of all parties in this transaction. Some of the Fuqahaa do not see the acceptance of the one to whom the debt was transferred as a conditon provided he has the wherewithal to settle it.

4. That the one to whom the debt is transferred is indebted to the one who transfered the debt to him. They said, if this is not the case and the one to whom the debt is transfered does not owe anything to the one who transfered to him, this is referred to as Wikaalah (Representation) and not Hawwaalah. And this is clear because here, he is clearly only representing his acquaintance to pay on his behalf.
The Fuqaha are also agreed that once Hawwaalah is established, the one who is owed may not refer back to the primary debtor because his debt had been legally transferred to the secondary debtor. This is clear.

For references on Hawwaalah and the matters arising on it, you may refer to the following sources:

Fat’hu Al-Qadir, fifth volume
Bidaayatu Al-Mujtahid, second volume
Al-Majmu’ Sharhu Al-Muhadhdhab, the first volume
Mughni Al-Muhtaaj, second volume
Al-Mughni Wa Ash-Sharhu Al-Kabir, fourth volume

How does this relate to the transfer of credit? As follows:

Abdullah owns a Mobile Financial Service Agency or a Payment Bank Agency. Sulayman approaches him and gives him a thousand naira. It means Abdullah owes Sulayman a thousand naira. Now, Sulayman is supposed to pay Uthman who is in another land a thousand naira. So he transfers his debt to Abdullah who is supposed now to pay Uthman that money. This is exactly what Financial Institutions do of money transfer from one account to another. And this is permissible in the Shariah in accordance with the Hukm of Hawwaalah. This is clear.

The Second, On Charging Money for Credit Transfer and other Financial Services

It is absolutely permissible in the Shariah to charge monies for any service rendered provided service rendered is permissible in the first place and both parties are agreed on the price of such service at the onset either verbally, impliedly or customarily.

By verbally, we mean that both parties have stated and agreed by word of mouth or in writing.

By impliedly we mean the discussion or the negotiation preceding the service or in its cause implies that payment be made.

By customarily we mean it is customarily known to the people in the community that such services warrant such payments. In this case, whether the parties state it or not, payment is due at the end of service.

These have been mentioned by the Fuqahaa in the matters of Al-Ijaarah (Labour and Services) and the Conditions that govern it.

Ibn Qudaamah referred to this in Al-Mughni and Ibn Taymiyyah in the Majmu’atu Al-Fataawah.

It therefore follows that to charge for financial services such as withdrawals and transfers and the likes is permissible in the Shariah provided the conditions of services charges referred above are fulfilled.

The third, Modern Day Banks and the Ruling of Working in them

As for these Interest Based Banks, we have responded earlier on the rulings of working in them as an employee in our response to Question 971 on our Telegram Channel Where we stated categorically that this is not permissible without a doubt Due to what they entail of Interest and oppression. We ask Allah to provide alternative places of work for our Muslim brothers and sisters who work in such institutions where they are free of these transactions that involve Haraam.

Following the ruling of working with Banks as an employee is the ruling of working with them as an Agent even if you are serving with them in this capacity as a Mobile Financial Agent. We know that these Banks have financial agents that offer the services of these Banks in individual capacities as Agents and on behalf of the bank. Example of this is FirstMonie. It is a First Bank Brand that registers Agents that represent the Bank and render financial services on behalf of these Banks in their own outlets in exchange for commissions per transactions.

This form of relationship between the bank and the agent is Wikaalah (Agency) and in the Shar’iah an Agent is a representative of the principal. This means that the Agent works for this Bank in an Agency Banking Agreement. There is no doubt that there is no difference between the one who works as a Staff of the Bank in whatever capacity and the one who serves as its Agent are same.

The Fourth, Mobile Financial Services and Payment Services Banks today

What is apparent today is that there are four categories of Financial Services Providers today.

The first, are those that work for the traditional banks in an Agency Banking Agreement for commissions on transactions. Example of this is FirstMonie, an agency for First Bank etc.

The Ruling of this, and Allah knows best, is impermissibility if the Traditional Bank the Agent represents is a Riba Based bank.

The Second, are those that work for Payment Services that are not the Traditional Riba Based Banks but that render financial services for which payments are made and services are charged. These Service Banks are referred to as Payment Services Banks (PSBs) and are different in scope and operations from the traditional Banks in many ways. One of the basic differences is that they are not permitted to offer loans or credit facilities to their customers — they can only receive deposits. Examples of these Service Providers are Hope, 9, MoneyMaster, etc

Then there are Mobile Financial Services such as PAGA, OPay, etc. These companies and service providers, though may Channel their services through banks, are not Agencies of these traditional banks. Working for them as AN Agent providing FINANCIAL services to people cannot be the same, in our understanding, as being an Agent directly working as Agency Banking Agreement under the traditional Riba Based Banks.

The Third, those Companies and Service providers that Co-Own Mobile Financial Services with Banks and thereby provide these services. Example is MoMo MTN’s Mobile Money Agents in collaboration with Diamond Bank and Airtel’s Access Money in collaboration with Access Bank.

These category, though in Partnership with Traditional Banks, is not the same as the category into which falls FirstMonie for instance. The reason is that a Partnership Business is an Entity on its own and is different in principle from any of the two individual entities that make up the Partnership. There is no wrong therefore, in our understanding, with serving as an Agent in this kind of arrangement.

The Fourth, are individuals that, on their own, use their POS Machines to deliver services to people in remote Areas with or without a service charge through their own bank accounts without being an Agent under any company or individuals. This category of individuals support the people in their respective communities and make financial transactions easy for them. There is no doubt that this form is permissible provided it is not exploitative and serves as a reprieve for the people. And if this individual provides these services even without using his own bank account but serves as an individual independent entity providing financial services, this may be rewarding as he clears the people and protects them from reliance on banks and makes things easy for them.

In conclusion,

This that we have said is what occurs to us on this matter about which numerous questions have been asked. It is entirely a matter of the modern age and that about which the insights and understanding of people may differ, Let not therefore, people lock horns in this regard.

The solution to the Ummah’s difficulty, is as we have always maintained, that the Muslims work toward the Shariah of Allah, its reestablishment and the revitalizing of its quintessence. The odds are many and the Worlds Order is against the Muslim Project in all ramifications. The Muslim Ummah must not give up. The youths must not surrender and be docile and accept the failures of the earlier generation that failed to change the status quo or prepare a clear Path that leads to the change thereof. Let us seek sound Knowledge and center around people of Knowledge, Piety, Understanding, Wisdom and Intellect who understand the Shariah and the time in which we live for guidance and direction on what we can do. It is not always the big steps that solve the problems. Most times, it is the daily small steps, the little acts, the small deeds, the inch movements, the marginal gains. One step closer, one inch away from the status quo, these marginals, once sustained, focused, concentrated and directional, lead closer to the goal of the Shariah we sought after.

اللَّهُمَّ أَبْرِمْ لِهَذِهِ الْأُمَّةِ أَمْرًا رَشِيدًا، تُعِزُّ فِيهِ وَلِيَّكَ، وَتُذِلُّ فيه عَدُوَّكَ، وَيُعْمَلُ فِيهِ بِطَاعَتِكَ
اللَّهمّ اسْمُ لِلْمُسْلِمِينَ أَمْرًا رَشَدًا يُعَزُّ فِيهِ وَلِيُّكَ، وَيُذَلُّ فِيهِ عَدُوُّكَ، وَيُعْمَلُ فِيهِ لِطَاعَتِكَ، وَيُتَنَاهَى عَنْ سَخَطِكَ

We hope with this we have shed light on this matter in summary. If further clarifications are required, questions may be sent and we shall respond insha Allah in accordance with the understanding and knowledge Allah as given us.

And we shall pause here insha Allah.

Barakallahu Fikum, Jazakumullahu Khayran.

سبحانك اللهم وبحمدك اشهد ان لا اله الا انت استغفرك واتوب اليك

Assalamu Alaykum Warahmatullah Wabarakaatuh

Rabi’u Al-Aakhir, 7th 1442
November, 22nd 2020


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