An Analysis of Shopee Pay Later Transactions Based on the Qard Theory

The Shopee application offers a 'pay later' payment mode known as Shopee Pay Later (SPL) and features four payment options, which are buy first and pay the total price of the goods purchased at a later date or payment made in installments over two, three or six months with accompanying charges. This transaction raises the question of whether SPL complies with the Qard Theory in fiqh muamalat . This is because qard is a loan that needs to be repaid to the creditor without any additional payment or charges. Therefore, this study aimed to study the 'pay later' buying and selling method based on the Qard Theory . This qualitative study used the document analysis method involving documents, such as books, articles, journals, newspapers and so on as well as the Federal Territory Fatwa for examining the SPL method. Data were then analyzed using the descriptive analysis method. Results of the study show that the SPL method is not permitted in Islam because the charges involved are deemed to be a form of usury ( riba ). This is because the 'pay later' method is not in accordance with the Qard Theory in Islam. This study provides knowledge to Muslim Shopee users about payment methods that are permitted and those that are prohibited in Islam.


Introduction
Shopee is an electronic trading or e-commerce platform that was introduced in 2015. The Shopee application is a subsidiary of SEA Group, which is an internet company based in Singapore (Atila, 2020). It has since expanded its business reach to 11 Asian countries, including Malaysia, Thailand, Taiwan, Indonesia, Vietnam, and the Philippines (Shopee, 2020). Various services are offered in the application in addition to online purchases, including paying utility bills, insurance plans, payments using QR codes, ticket purchases, food orders etc. In addition, Shopee provides a chat feature that allows buyers to interact directly with sellers without the need for other applications, such as WhatsApp and so on. Shopee also offers free delivery, flash sale, discounts and various other promotions (Minuriha, 2021).
The Shopee application also offers a 'buy first, pay later' payment method known as Shopee Pay Later (SPL). This feature is very popular among Shopee users because it is easier for buyers to buy something they want, with the option of paying later. An uncomplicated and user-friendly registration also encourages people to use SPL. SPL also features four payment options, namely buy first and pay the total price of goods purchased later or payment made in installments over two, three or six months (Subramaniam, 2021).
SPL is open to Malaysian citizens who are 18 years old and above and have a valid ID card. Pay Later is an innovation by Fintech that utilizes online information technology to secure a payment that does not require a credit card (Lestari & Rudy, 2021). Shopee has appointed Sea Money Capital Sdn. Bhd. to manage instalment payments using SPL. This means that when consumers use SPL, the supplier (Sea Money Capital Sdn. Bhd.) will first purchase the item from the merchant, then the consumer will pay in installments to Sea Money Capital Sdn. Bhd. (Tan, 2022).
In addition, there is a charge levied, which is a processing charge of 1.25% of the purchase amount every month throughout the instalment plan period. The instalment payment also needs to be completed within the stipulated period because buyers will be charged a late payment charge of 1.5% if they fail to repay the monthly instalment on the stipulated date (Shopee . However, several questions arise related to the granting of debt (qard) and the late payment charges for the loan debt. Qard is a loan that needs to be paid back to the creditor on the condition that there is no additional charges or benefits accruing from the loan (Syahnaz, 2009).
Therefore, this article aims to discuss how a qard contract is applicable in SPL as well as conduct an analysis of SPL based on fiqh muamalat. This study starts with the concept and operations of SPL, the qard concept according to Islam, followed by a discussion on the qard contract in relation to buying and selling based on the 'pay later' concept using the Shopee application by subjecting it to the Federal Territory Fatwa. The focus of a qard contract is the excess charge imposed, which is related to usury (riba). Finally, the discussion ends with the discussion on the finding.

Problem Statement
Among the research problems that need to be resolved are

Syariah Issues in Shopee Pay Later (SPL) Transactions
Basically, SPL is a facility that benefits consumers when purchasing items they desire. However, there is a fatwa stating that there is a Syariah issue in SPL transactions, such as usury (riba), which involves transaction and late payment charges (Luqman, 2021). Usury (riba) must be avoided as it is prohibited in Islam. Therefore, Muslims are forbidden to get involved in matters that are associated with the element of usury (riba) because usury (riba) is forbidden and deemed a sin. This statement is supported by Rahayu (2021); Utami (2021), who stated that the charges levied in SPL involve usury (riba) but when the user pays in installments at a specified time, it is not usury (riba) because there is no charge.
There are two opinions regarding the charges that are levied, namely the additional charge in SPL being a delayed price and that the additional price is usury (riba) (Hasanah, 2021). According to Monica (2021), who used the DSN-MUI Fatwa (No:116/DSN-MUI/IX/2017), contracts associated with electronic money is a qard contract, which is a loan agreement whereby the money must be returned at any time according to the agreement. However, the Federal Territory Mufti's Fatwa regarding Syariah issues associated with Shopee Pay Later Malaysia has yet to be described in detail. Based on this problem statement, this study aims to describe the true form of qard in Islam and determine whether 'Shopee pay later' conforms with the Qard Theory in fiqh muamalat.

Methodology
This qualitative study used the document analysis method as a research design because this method is a suitable for analyzing data pertaining to Qard Theory used in SPL. Data collection employed the content analysis method involving books, newspapers, theses, articles, journals, websites etc. to achieve the objectives of this study. The Federal Territory Fatwa was also used to realize the objectives of this study. The findings were then analyzed using a descriptive method approach.

Literature Review: The Qard Concept According to Islam
Literally, al-qard or al-qat'u means cutting off (in Arabic). The property loaned to a debtor is called qard because the creditor takes part of his property and loans it to the debtor. The term al-qard means the delivery of an item or property by a creditor to a debtor on the condition that the latter is responsible for returning the same property to the creditor immediately upon demand (Syahnaz, 2009). Meanwhile, Cahyadi (2021) mentioned that qard refers to giving property to people who will benefit from it and replace it in the future.
According to Mawaddah (2020), the meaning of qard is based on the opinion of four schools of thought or the four sects in Islam, namely the Syafie sect, which believes that qard is the ownership of an object and it must be returned with the same value. Whereas the Hanafi sect defines qard as an agreement between two parties who agree in a cooperation agreement for the sake of profit. Qard refers to a property owner who hands over his property with specified conditions, to a person who trades it for specified revenue share (Cahyadi, 2021). Sari (2022); Mawaddah (2020) stated that the Maliki sect believes that a qard contract refers to the handing over of something of value to another person to obtain a profit, whereby the said item of value cannot be returned in a wrong way (invalid), with the provision that the item should be replaced in future if the item received is not the same. Al-Qard is stipulated in the al-Quran according to the exhortations of Allah SWT, meaning: "Who is it that would loan Allah a goodly loan so He may multiply it for him many times over? And it is Allah who withholds and grants abundance, and to Him you will be returned" (Surah al-Baqarah 2:245). Khotama (2017) mentioned that the law on qard follows the law of taklifi, which can be reprehensible (makruh), mandatory (wajib) or forbidden (haram). This statement is supported by the Islamic Religious Council of Selangor (MAIS) (2022) regarding people who owe money, whereby the law of debt originally claimed qard to be permissible, but it can change according to the situation, such as when a person desperately needs money, then he must borrow it. However, the law of debt for creditors changes depending on whether it is forbidden (haram), reprehensible (makruh) or permissible (harus). Likewise,  said that the law of debt is necessary and not mandatory. The law of debt is neither mandatory nor forbidden (sunat) but encouraged because the person who extends a debt (creditor) will receive a special reward from Allah SWT although not for the purpose of taking advantage or reaping benefits from debtors.

Qard According to Islam
A comprehensive qard contract complies with all the rules and conditions set by Shariah. According to Sari (2022), the fundamental elements of qard include muqrid (creditor), muqtarid (debtor), Qarad (property that is loaned or item in a contract), and sighah (obligation and qabul). Wahbah Zuhaili explained that there are four conditions that must be met in a qard contract (Rahmadayanti, 2020), such as: i. The qard agreement or contract is carried out with sighah, which comprises ijab (offer) and qabul (acceptance) or other elements in a sighah that can replace it, such as muatah (contract without ijab and qabul) ii. Both parties involved in the contract must understand the law (be sensible, mature and without coercion). Based on these conditions, then qard is a tabarru' contract (mutual help); hence, a qard contract made by a child, a mentally unsound, mentally challenged or a person who is coerced, renders the agreement or contract invalid or void. iii. According to the Hanafiyah sect, property that is loaned should be a property that has an equivalent in the market, or of a similar value (mithli -according to the majority of the ulama, the property that is loaned in a qard and can be any property that is used as collateral).

Usury (Riba) in Qard
Ahmad Sanusi (2018) explained that usury (riba) in qard or also known as riba al-qard, is any additional benefit that is conditional on the principal loan amount which is charged to the borrower. Riba al-qard is a type of usury (riba) since it is the excess amount against the loan that must be paid by the debtor to the creditor. Majority of the ulama agree that usury (riba) in this sense is similar in meaning to conventional interest (Fincyclopedia 2020). However, any excess or consideration (iwad) extended by the debtor of his own free will and without coercion, is not usury (riba), instead, it is a sign of willingness and sincerity shown by the debtor or borrower.
According to ulama, usury (riba) is divided into two categories, namely riba al-qard, which occurs in debt transactions, and riba al-buyu', which occurs in the sale and purchase of ribawi items, such as gold and silver (Abd Hakim, 2021). Riba al-qard requires certain additional payments to be made every month or every year (Al-Zuhaili, 2011). Fiqh scholars distinguish between the additional payment said to be usury (riba) and the additional payment that is not considered usury. The additions included in usury are additions that are mandatorily required at the beginning or at the beginning of the offer (Taufiq, et al. 2019).

Findings of The Study
This study found that Shopee Pay Later (SPL) transactions based on the Qard Theory in Islam are as follows

1-An Analysis of the Akad Qard in Shopee Pay Later
Basically, debt receivable in Islam, which is called qard, is permitted. This is because it is human nature to always extend help and reciprocate that gesture. Debt receivable can also help people who are in difficulties or facing hardship in life and thus, strengthen the bonds of camaraderie amongst each other. Qard is a type of assistance involving the lending of property to others and the return of the said property without any addition (payment or otherwise). In the SPL application, the terms and conditions of the qard contract are as follows (Cahyadi, 2021) i. Offer and Acceptance In the SPL agreement, there is a term or condition in the agreement, which is the confirmation before registering the account. This term or condition of the agreement must be fulfilled and understood by the customer before continuing with the registration process. When wanting to make a transaction, the user must first checkout in order to confirm the purchase of the goods or service. This means that users can cancel the checkout process if they do not want it. Although the offer and acceptance are made online, the contract is considered complete and valid when there is a clear offer and acceptance even if both parties are not meeting physically. This can be done and is considered valid based on the exhortations of Allah SWT, which means "O believers! When you contract a loan for a fixed period of time, commit it to writing. Let the scribe maintain justice between the parties. The scribe should not refuse to write as Allah has taught them to write. They will write what the debtor dictates, bearing Allah in mind and not defrauding the debt. If the debtor is incompetent, weak, or unable to dictate, let their guardian dictate for them with justice. Call upon two of your men to witness. If two men cannot be found, then one man and two women of your choice will witness-so if one of the women forgets the other may remind her.1 The witnesses must not refuse when they are summoned. You must not be against writing ˹contracts˺ for a fixed period-whether the sum is small or great. This is more just ˹for you˺ in the sight of Allah, and more convenient to establish evidence and remove doubts. However, if you conduct an immediate transaction among yourselves, then there is no need for you to record it, but call upon witnesses when a deal is finalized. Let no harm come to the scribe or witnesses. If you do, then you have gravely exceeded ˹your limits˺. Be mindful of Allah, for Allah ˹is the One Who˺ teaches you. And Allah has ˹perfect˺ knowledge of all things." (Surah al-Baqarah, 2:282).
ii. 'Aqidain (creditor and debtor) In the SPL, the creditor is Shopee Malaysia and the debtor is the customer. One condition for becoming a creditor or debtor is that both parties must be legally sane. Thus, if a consumer can carry out the transaction properly via a mobile phone, then it is presumed that the consumer is in a sound state of mind. Besides that, one condition for registering for Shopee Pay Later is that the person should be 18 years old and above and the age is verified by presenting a valid identity card (Shopee, 2021). Hence, this ascertains that the person is sane and of age.
iii. Ma'qud Alaih (items sold) Shopee provides various types of goods by attaching photos that indicate the existence of the goods. Ordering goods from sellers also takes time to reach the buyer and the buyer is advised to make a comment regarding the goods ordered as an indication that the goods have been received by the buyer as well as the condition of the goods. The next requirement is that the debtor must return the money borrowed and there can be no benefit (compensation) from the creditor because it will then become usury (riba) (Anon. 2021). However, the SPL application, there are extra payments that buyers have to pay, namely processing and late payment charges (Shopee, 2021).
Like credit cards, SPL also charges processing and late payment charges to buyers who use the BNPL (Buy Now Pay Later) payment method. The following is the payment plan for processing and late payment charges applied in SPL service transactions. Pay Later with this instalment method clearly contains an element of ambiguity (gharar). Although an instalment method is offered with a charge as low as 0%, buyers cannot see the goods in detail because they can only see photos of the goods offered (Utami, 2021). The following is the payment plan for processing and late payment charges applied in SPL service transactions.  (2021) Islamic economics is clear about the prohibition of usury or benefits (Utami, 2021). However, in a SPL loan, there are some charges, namely a processing charge of 1.25% of the purchase amount each month throughout the period of the instalment plan. The payment amount in installment also needs to be completed within the set period because buyers will be charged a late payment charge of 1.5% if they fail to repay the monthly instalment by the stipulated date (Shopee, 2021). This means that the buyer has to pay the excess on the loan, which is in the form of fines and interest.
Ulama agree that a qard contract, which is has conditional elements for a loan of money that must be returned at an agreed time, is riba al-qard (Fatimah, 2021). This is because any addition to the loaned goods or money or surplus that has no replacement imposed by the lender (creditor) while waiting for repayment is prohibited in Islam because it is considered usury (riba) (Syahnaz, 2009). This was exhorted by the Prophet S.A.W, meaning: "Every loan that leads to benefits (for the debtor) is considered as usury (riba)" (HR. Baihaqi). Studies on Fiqh Muamalat reveal that the contract used in SPL refers to a qard contract, where no additional conditions are allowed to the original contract (Siregar, 2022). The Hanafi sect is of the view that the law of granting a loan is still valid but the additional conditions are invalid, while the Syafie sect believes that the qard contract with additional conditions is invalid (Saputri, 2020).

2-Federal Territory Fatwa on Shopee Pay Later Loans
According to the Mufti of the Federal Territory, the Syariah issue related to SPL refers to transaction charges incurred, namely processing and late payment charges. However, for oneoff payments there is no Syariah issue involved because there is no fee charged for the payment method (Abd Hakim, 2021;Prastiwi & Nur, 2021). Thus, if the user repays the payment the following month, then no additional charges are incurred, therefore, it can be concluded that this transaction is permitted in Islam. However, the instalment payment method over a period of two, three or six months is absolutely prohibited because there is an additional charge, which is deemed as usury (Hasanah, 2020). Therefore, the consumer must examine every transaction so as not to get involved in matters that are forbidden by Allah S.W.T. A description of usury (riba) found in the processing and late payment charges is provided below.

a. Processing Charges
The processing charge is an additional charge incurred by Shopee users who choose the Shopee Pay Later (SPL) service to make payments for goods purchased in installments of either 2, 3 or 6 months. The charge is 1.25% per month of the full payment amount . For example, if a consumer makes a purchase of RM2000 by choosing to pay in installments for 3 months, the user has to pay a processing charge of RM50 (1.25% x RM 2000 x 2 months) if the charge is already paid for in the first month. This means that consumers have to pay more if they want to pay in installments. Thus, it is clear that the Shopee application benefits from users who choose the instalment payment method. However, excess benefits like this are prohibited in Islam (Rahmadayanti, 2020). Therefore, the processing charge, which is an additional charge of 1.25%, is considered usury (riba) because Shopee gains from the additional profit or benefit. However, the decision by the MPS at the 4th meeting on 14 February 1998, the 95th meeting on 28 January 2010 and the 101st meeting on 20 May 2010, decided that service or service charges are allowed as it involves the concept of gharamah (fine or penalty), ta'wid (compensation) as well as compliance to several conditions stipulated based on discussions among contemporary ulama (Bank Negara Malaysia, 2020). Among the conditions that must be complied with are as follows: i.
The charges applied must be commensurate with the actual cost. Actual cost means the cost of making or producing a product or service, without taking into account the cost of storage or selling (Abdul Nasir, 2013). ii.
Charges should be based on direct costs, such as employee wages and rental of equipment. iii. Charges cannot be charged as a percentage of the loan amount. Instead, it should be in accordance with actual management costs involved without any additions. iv. Estimated charges can be applied if it is difficult to place a definite amount after the account is closed at the end of the year. Therefore, if the actual amount is already known, every excess must be returned to the debtor according to the mutually agreed upon medium.
The conditions are based on the views of the International Academy of Islamic Fiqh in Jeddah, fatwa issued by the Saudi Lajnah Da'imah as well as the views of the AAOIFI Shariah Committee. As for the loan standards issued by the AAOIFI Shariah Committee, it states that: "It is permissible for lending institutions to charge wages on a loan service offered based on an amount equivalent to the actual direct expenses, but it is not permissible to charge anything extra because every addition to the actual expenses is prohibited" (Azman et al., Therefore, payment to the SPL service in installments is not allowed because the processing charges applied do not reflect the actual cost and are classified as usury (riba). Any additional charge to the actual expenses is illegal. Shopee users should refrain from using the instalment payment service to avoid being saddled with usurious loans. Therefore, it is forbidden for Muslims to take loans that are based on usury (riba) for any reason and consumers must make efforts to seek Shariah-compliant loans.

b. Late payment Charges
Late payment charges will be applied to users who fail to pay by a specified date. This charge is incurred for two payment methods, which is either a delay in payment in the following month or installments for 2 months, 3 months or 6 months, whereby 1.5% is charged on the outstanding amount. This means, if the user fails to make the payment on the specified period or day, then they have to pay a late payment charge and a processing charge of 2.75%. For example, if a consumer makes a purchase of RM2000 by choosing to pay in installments for 3 months, the consumer might have to pay a processing charge of RM50 (1.25% x RM 2000 x 2 months) plus a late payment charge of RM90 (1.5 % x RM 2000 x 3 months). Hence, the total charges incurred will be as much as RM140. However, this kind of penalty is forbidden in Islam because it burdens the consumer.
According to the Federal Territory Fatwa that appeared in Irsyad al-Fatwa Series 638, the interest involved in late payment charges is al-qard interest (Abd Hakim, 2021). However, late payment charges must be in accordance with the Shariah Resolution issued by the Shariah Advisory Council of Bank Negara Malaysia (BNM) at the 4th meeting on 14 February 1998, 95th meeting on 28 January 2010 and the 101st meeting on 20 May 2010. The Shariah Resolution states that the imposition of late payment charges by Islamic financial institutions, which includes both the gharamah and ta`wid concepts, is permissible, subject to the following (Bank Negara Malaysia, 2020): i.
Ta`wid can be imposed on late payment for financial obligations resulting from exchange contracts (such as sale and lease) and qard. ii.
Ta`wid can only be imposed after the end of the debt repayment period agreed by both contracting parties. iii. Islamic banking institutions can recognize ta`wid as income on the basis that it is imposed as compensation for actual losses suffered by Islamic banking institutions. iv. Gharamah cannot be considered as income, instead it must be channelled to certain charities. This means that all forms of benefits accruing from a debtor are forbidden by Allah S.W.T and the law states that it is forbidden (haram). The law interprets usury (riba) as illegal even if there is a concession or an agreement between the borrower and the lender in the course of buying and selling, as explained in the Qur'an and hadith in relation to its prohibition. Thus, in the context of late payment charges included in the category of usury, Islam forbids any additional charges imposed on loan repayments.

Discussion of The Findings
This section discusses the results of the study based on an analysis of the qard contract as well as Syariah issues highlighted by the Federal Territory Fatwa pertaining to Shopee Pay Later (SPL) transactions. Syariah issues found in Shopee SPL transactions are based on elements depicted in Table 2 below.  Table 2, it can be concluded that there are Syariah issues, such as riba al-qard, in the SPL service. This is because Shopee charges a processing charge of 1.25% and a late payment charge of 1.5% to consumers who choose to pay in installments and those who fail to make payments within the stipulated period. The charges are not in accordance with the concept of qard in Islam because conditional loans are not permitted in Islam. Next, the SPL application also contains the element of gharar but this issue is not considered serious because Shopee provides a 'return and refund' feature for customers who are not satisfied with the goods received. This feature can eliminate the risk of goods that cannot be delivered or do not match the specifications, which is in line with the principles of Khiyar in Islam. (Anon. 2021). Meanwhile, there is no element of gambling in the SPL transaction. Table 3 shows that riba al-qard exists in SPL transactions based on the method of payment offered. The status of SPL transactions based on the Qard Theory in Islam are as follows:  Table 3) regarding the qard theory applied to Shopee's 'buy now pay later' payment mode, i.e., a one-off payment done in the following month, indicates that this mode is permitted in Islam because there are no prohibited elements in this mode. However, for deferred payments involving two, three or six months, the loan is not permitted according to Shariah. This is because there is a processing charge of 1.25% for all consumers who choose the instalment method. Besides that, consumers who fail to pay within the specified period will also be charged a late payment charge of 1.5%. These charges are in excess of the original amount that ought to be paid by the consumer and this becomes a form of usury. Therefore, consumers should avoid using the instalment feature in SPL so as not to engage in any buying or selling that involves usury.

Conclusion
In conclusion, the analysis of Shopee Pay Later (SPL) transactions based on the Qard Theory shows that there is a Syariah issue, namely the presence of the element of usury. This is in line with the decision of the Federal Territory Mufti appearing in Irsyad Al-Fatwa Series 638, which claims that there is an element of riba al-qard in the Shopee Pay Later mode of payment. Payment of loans in installments for services or goods is not permitted because there are extra charges imposed, such as processing and/or late payment charges, which are elements prohibited by Islam. However, one-off payments are permitted because the transaction does not contain prohibited elements. Although the business of buying and selling in e-commerce applications is permitted, the mandatory law does not cover all the transactions involved in the application. The SPL loan that was introduced to facilitate consumer affairs is also not a non-Shariah-compliant facility, but there are parts of the processing and transaction methods that need to be researched and understood by all Muslims so as not to indulge in matter that are prohibited in Islam. Therefore, Muslims are prohibited from making any loans that involve usury because it is illegal and contributes towards committing a sin.