 In this module, we shall actually start looking into Islamic credit cards. Islamic credit cards have been issued and offered by quite a number of Islamic banks in the Middle East and in the Far East, especially in Malaysia and of course in other parts of the world as well where Islamic banking is prevalent. In case of Pakistan, Islamic banks and conventional banks offering Islamic banking services through Islamic windows decided not to offer Islamic credit cards for a variety of reasons. But one primary reason that the Sharia scholars in this country did not like the idea of an Islamic credit card. It is only off late that two banks have started offering Islamic credit cards and these two banks are Standard Chartered Saadik and Basil Bank. The five fully fledged Islamic banks in this country have yet to offer an Islamic credit card. Let's see when that happens. But before that, I must say that an Islamic credit card works more or less the same way as a conventional credit card, of course with some important differences. And this applies not only to Islamic credit cards, this applies to Islamic mortgages, other Islamic personal finance facilities and so on. So there are similarities and there are differences. In case of an Islamic credit card, a credit limit is generated through a mechanism and that mechanism is based on Tawarru. So what happens when a customer applies for a credit card and if the application is accepted by the card provider based on a number of factors, but primarily based on the credit worthiness of the customer, then an arrangement is agreed between the two parties i.e. the card provider and the prospective card holder to generate a credit limit. This in many cases is done with the help of Tawarru. Tawarru is an arrangement is an Islamic mode of financing which we have already discussed and explained. At that time, I mentioned that a lot of people are not happy with the way Tawarru works or commodity Muraabha works. However, its applications in Islamic banking and finance are many and one of this application is the application of Tawarru in the context of Islamic credit cards, whereby Tawarru is used as a mechanism to generate that credit limit. When you apply a card provider, it tells you that you do not spend more than 1 lakh rupees, this is your limit. To generate that limit, Islamic banks and the customer would enter into a Tawarru based arrangement. What is that? The bank would buy a commodity for say 100,000 dirhams on a spot basis and would sell that commodity to the customer for a profit, 120,000 dirhams for example on a deferred payment basis. The customer would sell that commodity to another commodity broker for the spot price of 100,000 dirhams. These 100,000 dirhams received from the commodity broker too would be put into an account with the bank in the name of the customer. That would be the credit card account of the customer. That would be actually the credit limit or credit facility offered by the bank. Now this 20,000 which is the murabha price, that could be actually set as the annual fee of the Islamic credit card. So if you have taken a credit card of 1,00,000 dirhams, then you may have to pay 20,000 dirhams in the form of a card fee for one year. Of course this is a hypothetical example. This fee could be a lot lower than what I am mentioning over here. I am using this 20,000 annual fee figure just to give you an alarm. Otherwise this may not be the actual practice by Islamic banks. So to summarize 1,000 dirhams they become the credit facility and 20,000 dirhams they become the card fee. Annual card fee which could be about 1,666.66 on a monthly basis. This fee can be waived off by the card provider depending on the usage, depending on the circumstances and of course depending on some other factors as well. In the beginning even conventional credit cards they would charge an annual fee. But with the increase in competition in the credit card market now annual fee is not charged by many credit card providers especially in the west. But we find that in some emerging markets or developing countries where credit cards are new the card providers may be charging an annual fee or a monthly fee or some cases they give it a different name. So Islamic credit cards they actually depend very crucially on this fee. In practice they may be able to waive off this fee for quite a number of their card holders.