Bank Negara Malaysia (BNM) has taken one more step toward supporting the country’s Buy Now Pay Later (BNPL) sector with its latest regulatory ruling, particularly for the Shariah compliant segment, to encourage them to uphold responsible practices. NESSREEN TAMANO has the story.
The Shariah Advisory Council (SAC) of the central bank has ruled that the BNPL facility is permissible for licensees of the Islamic Financial Services Act, the Financial Services Act and the Development Financial Institutions Act effective the 24th January 2024, provided that the BNPL facility is structured based on appropriate Shariah compliant contracts.
“As such, written approval of the Islamic financial service provider’s Shariah committee is required to ensure that the structure of the BNPL facility and its contractual terms and conditions comply with Shariah,” read an official document.
The SAC also ruled that a BNPL facility for the purchase of gold and silver must be conducted on spot basis, but with a settlement period of up to two days after the transaction date that is permissible, to give room for operational constraints.
The Shariah council is encouraging Islamic financial service providers offering this facility to have in place a thorough credit evaluation process, to assess the consumers’ affordability and ensure that their financial health is not adversely affected.
Currently, the BNPL facility offered by non-bank providers do not fall under the purview of the central bank or any regulatory agency. There is a proposed enactment of a Consumer Credit Act to establish the Consumer Credit Oversight Board as an independent authority regulating Islamic BNPL offerings.
Non-bank Islamic BNPL providers intending to offer the facility are encouraged to refer to the SAC ruling as a guide, and to educate their consumers on the product and its responsible use, the document read.
Aside from Islamic banks offering BNPL solutions, the more popular non-bank BNPL providers in Malaysia include Airapay, du-it, myIOU, Riipay and Shopee’s Islamic BNPL offering.