AHMAD IBRAHIM KULLIYYAH OF LAWS

TRANSACTION IN ISLAMIC LAW II

SHAS 2328

SECTION 1

SEMESTER 1, 2023/2024

TUTORIAL SLOT: THURSDAY (11-12 PM)

WRITTEN ASSIGNMENT

TOPIC:

INTEGRATION OF WAKALAH IN E-WALLET SERVICES IN MALAYSIA

PREPARED BY:

NAME MATRIC NUMBER

AHMAD IDHAM BAIHAQI BIN MD AZMAI 2129255

NURUL ATIKAH BINTI HASSAN GHANI 2123154

AMIR HAFIZ BIN AZIZAN BAQI 2122945

AHMAD ZAIM SUHAIL BIN AHMAD MUJAHID 2128329

PREPARED FOR:

ASST. PROF. DR. MOHAMED RASHID BIN AB RAZAK

DATE OF SUBMISSION:

14th DECEMBER 2023

 TABLE OF CONTENTS

INTRODUCTION 2

CONCEPTUAL DISCUSSION 3

APPLICATION IN MALAYSIA 5

CONCLUSION 9

BIBLIOGRAPHY 10

1
INTRODUCTION

Traditionally, the purchase of goods can only be performed by exchanging

goods with fiat money. In recent years, the dynamic landscape of financial services

has witnessed a profound transformation driven by technological advancements.

Among the innovative developments, the integration of Wakalah in e-wallet services

has emerged as a pivotal stride, particularly within the Malaysian financial

ecosystem. In Malaysia, there are more than 50 e-wallet applications offered by

various vendors, including banks and non-bank institutions such as Boost, Touch N

Go eWallet, GrabPay, ShopeePay and many others.1

Additionally, the Malaysian government has taken several measures to

promote the use of e-wallets by appointing these vendors and others as key players

in the e-wallet industry providing financial support through programs like e-Tunai,

ePENJANA, eMADANI and many others.

These digital wallets, offering convenience and contactless transactions, have

become ingrained in everyday life, streamlining payments and facilitating financial

inclusion. However, amidst this technological revolution, questions arise regarding

the compliance of these services with Islamic financial principles, particularly the

concept of wakalah (agency) in e-wallet services. This assignment delves into the

intricate interplay between traditional Wakalah principles and the current practice of

transaction by using e-wallet. This study aims to analyse the concept of wakalah

from shariah perspective, application of wakalah in e-wallet services and to highlight

shariah issues pertaining to the application of wakalah in e-wallet services.

1
Celcom. (2021). E-wallet Malaysia: comparison of top 5 e-wallets in Malaysia 2021.
https://www.celcom.com.my/blog/lifestyle-technology/2021/e-wallet-malaysiacomparison-of-top-5-e-w
allets-in-malaysia-2021

2
CONCEPTUAL DISCUSSION

Wakalah is a contractual agreement where one party (muwakkil) grants

another party as their representative (wakil) to carry out a specific activity, which can

be assigned either willingly or with the requirement of a fee2. As defined by Mazhab

Shafi’i, wakalah is the act of delegating or assigning a task that one is capable of

doing to another person, who can carry out the task on behalf of the delegator during

their lifetime3.

The scholars concur that wakalah is acceptable as long as the essential

conditions are met, in accordance with the supporting evidence outlined below:

Al-Quran;

َ ‫وا َح َك ۭ ًما مِّنْ َأهْ لِهِۦ َو َح َك ۭ ًما مِّنْ َأهْ لِ َهٓا ِإن ي ُِريدَ ٓا ِإصْ َل ٰـ ًۭحا ي َُو ِّف ِق ٱهَّلل ُ َب ْي َن ُه َمٓا ۗ ِإنَّ ٱهَّلل َ َك‬
‫ان َعلِيمًا َخ ِب ۭيرً ا‬ ۟ ‫اق َب ْين ِِه َما َفٱب َْع ُث‬
َ ‫َوِإنْ ِخ ْف ُت ْم شِ َق‬

Translation: “And if you fear dissension between the two, send an arbitrator from his

people and an arbitrator from her people. If they both desire reconciliation, Allah will

cause it between them. Indeed, Allah is ever Knowing and Acquainted (with all

things)”4 (Surah an-Nisa’ 4:35)

Hadith;

Narrated Jabir ibn Abdullah: I intended to go (on expedition) to Khaybar. So I came

to the Holy Prophet (‫)صلى هللا عليه وسلم‬, greeted him and said: I am intending to go to

2
Bank Negara Malaysia, “Wakalah (Shariah Requirements and Optional Practices) Exposure Draft,”
2013.
3
Khadijah Amira Abdul Rashid, Mohd Mahyeddin Mohd Salleh, and Mohd Soberi Awang, “Concept
and Application of Ijarah, Wakalah and Ji’alah Contract in the Public Donation: A Comparative Study
between Non-Governmental Organizations (Ngos) in Malaysia,” Malaysian Journal of Syariah and
Law 8, no. 2 (2020): 54–61, https://doi.org/10.33102/mjsl.vol8no2.255.
4
Al-Quran (4:35)

3
Khaybar. He said: “When you come to my agent, you should take from him fifteen

wasqs (of dates). If he asks you for a sign, then place your hand on his collar-bone”.5

According to the hadith mentioned, Rasulullah also engaged in the practice of

wakalah contracts on different occasions such as debt repayment and other related

tasks. Based on ijma', the consensus of scholars affirms that wakalah is permitted

without any juristic contention. In addition, they are more inclined to endorse wakalah

due to its fundamental principle of assistance6.

Wakalah is supported by four pillars. First, an individual who represents and

possesses the authority over the subject matter that he wishes to represent is

referred to as a “al-muwakkil”. Another representative, al-wakil, is the second.

Al-wakil ought to possess the capacity to execute the directive, provided that it

remains within the parameters and does not contravene the syara’. Thirdly, the

object represented, which is the agent, must exercise reasonable care and skill while

carrying out the directives of the principal. Sighah is the fourth component. In order

to qualify as a wakalah, an individual must be entitled and qualified to represent a

particular matter7. Al-Wakil, meanwhile, must be of sound mind and be well-informed

of the subject matter being represented to him in order to prevent contract fraud.

Furthermore, it is essential that the subject matter be representative in nature,

including but not limited to property matters and debt collection8.

Wakalah al mutlaqah, wakalah al khassah, wakalah al aammah, and wakalah

al mu'allaqa are the four distinct varieties of wakalah. According to Maliki and Hanafi
5
Hadith Sunan Abu Dawud
6
Maryam Sofia Suhaimi et al., “Service Based Contract Used in Islamic Finance: A Comparison of
Hawalah, Wakalah, and Kafalah,” International Journal Of Management and Applied Research 3, no.
4 (2016): 160–71, https://doi.org/10.18646/2056.34.16-013.
7
Muhammad Yusuf Saleem, “The Contract of Agency (Wakalah),” Islamic Commercial Law, 2012,
67–78, https://doi.org/10.1002/9781119198956.ch4.
8
Wahbah Zuhayli and Abdul Hayyie Kattani, Fiqih Islam Wa Adillatuhu (Jakarta: Gema Insani, 2010).

4
jurists, a wakalah contract in which a commission is paid to an agent is binding. It

can be evident via a hadith Narrated `Uqbah bin Amir: that the Prophet SAW had

given him sheep to distribute among his companions and a male kid was left (after

the distribution). When he informed the Prophet SAW, he said (to him), “Offer it as a

sacrifice on your behalf”9. It can be deduced that the balanced one goat was given

to Uqbah as a wage. Nevertheless, wakalah can also be executed without wage.

Voluntary acts of goodness and ta’awun, which are strongly promoted in Islam, are

considered to be extremely commendable10. Lastly, a binding wakalah contract can

be dissolved in the following situations: (a) if the wakil dies or dissolves, and the

contract requires their personal involvement; (b) if the muwakkil loses their right to

the subject matter of the wakalah; (c) if both parties agree to terminate the contract;

or (d) if the muwakkil chooses to end the contract due to the wakil’s misconduct,

negligence, or violation of specified terms11.

APPLICATION OF WAKALAH IN MALAYSIA

In Malaysia, wakalah is being used in many situations and one of them is the

use of an E-wallet. E-wallet can be defined as an application which allows the user to

perform electronic transactions with others. This type of transaction is one where a

person exchanges his money which is in a digital form with a product that he wanted

to buy. This application is currently used by many people as it eases them since

there is no need to cash out their money from the machine anymore. According to

Oppotus (2023), 45 percent of Malaysians said that they would use an E-wallet in

9
Hadith Sahih Al-Bukhari
10
Khadijah Amira Abdul Rashid, Mohd Mahyeddin Mohd Salleh, and Mohd Soberi Awang, “Concept
and Application of Ijarah, Wakalah and Ji’alah Contract in the Public Donation: A Comparative Study
between Non-Governmental Organizations (Ngos) in Malaysia,” Malaysian Journal of Syariah and
Law 8, no. 2 (2020): 54–61, https://doi.org/10.33102/mjsl.vol8no2.255.
11
Wahbah Zuhayli and Abdul Hayyie Kattani, Fiqih Islam Wa Adillatuhu (Jakarta: Gema Insani, 2010).

5
making payment of their transactions in 2022. Because of this, it is important to look

at whether the concept of E-wallet is in accordance with the Islamic law of

transactions or not. It was decided by Bank Negara Malaysia in 2020 that E-wallet

transactions should be considered as a wakalah contract and this concept should be

adopted in all E-wallet applications.12 The purpose of treating the E-wallet transaction

as a wakalah contract is because it can protect the rights of the contracting parties.

Bank Negara Malaysia also underlined some guidelines that need to be followed in

this transaction which are that the subject matter must be shariah compliant and it

must be determined upfront by the principal, made known and accepted by the

agent.13 To illustrate the concept of wakalah in E-wallet, Touch n’Go eWallet

application can be a good example. When a person is using Touch n’Go eWallet,

there are several parties involved which are the user, the E-wallet producer and

seller. The user will pay for the goods that he wants to buy by using the digital money

provided by the E-wallet producer. In this situation, the E-wallet producer is the agent

(wakil) while the user is the principal (muwakil) where he will appoint the producer to

make a transaction with the seller.14 In order for the E-wallet transaction to be valid

according to the Shariah, the Shariah Advisory Council of Bank Negara Malaysia

explains that the E-wallet producers must be approved issuers where they are

required to comply with the Guideline on Electronic Money (the Guideline) and it is

also an obligation on the part of the user to make sure that all his transaction using

12
K. A. M., & Yusoff, A. F. J. (2022). Issues in the Application of Wakalah (Agency) in Ewallet.
International Journal of Academic Research in Business and Social Sciences, 12(11), 2476 – 2487.
13
Md. Nor, M. Z., Naim, A. M., Muhamed, N. A., Mirza, A. A. I., Ahmad, A., Shukor, A. R. A., & Ali, S.
R. S. (2021). Legal issues in e-wallet practices. UUM Journal of Legal Studies, 12(2), 229-252.
https://doi.org/10.32890/uumjls2021.12.2.10
14
Asmadi et al., “Penggunaan E-Wallet Mengikut Perspektif Syarak.”,Jabatan Kemajuan Islam
Malaysia. 2020.
https://ciri.islam.gov.my/_msys/files/jurnal/16727_Penggunaan%20E-Wallet_Interactive.pdf

6
E-wallet are for Shariah compliant transactions only.15 Under the Guideline, the

E-wallet producers are only allowed to issue-money as the instrument for payment,

invest the funds placed in the trust account and thereby use the revenue generated

from the investment.

Though the concept of wakalah can be applicable in the use of E-wallet, there

are still some issues that arise. Firstly, the issue of whether the status of the wakalah

is valid if the subject matter is something that is not permissible in Shariah? Usually,

most of the E-wallet applications will have no dispute in terms of the contracting

parties, offer and acceptance. However, there will be a problem on the subject matter

of the wakalah contract. It must be noted that the wakalah contract will be illegal if

subject matter is impermissible. For example, if a person buys wine or gambling

through E-wallet payment, that wakalah contract will be illegal on the ground that the

subject matter is impermissible under the Shariah.16 The buyer cannot appoint the

E-wallet producer to buy illegal things from the seller since the rationale of permitting

E-wallet transactions is because it can bring interest to the people. If such a

transaction brings harm then it will be prohibited under the Shariah. This is clearly

mentioned in Surah Al-Baqarah verse 219 which means “They ask thee concerning

wine and gambling, say in them is great sin and some profit for men; but the sin is

greater than the profit”.17

Moreover, in the use of E-Wallet, the users are not able to impose special

conditions to the E-Wallet producer limiting the funds to uses that comply with

Shariah. Here, users may find it difficult to believe if the concept of wakalah in
15
The Shariah Advisory Council of Bank Negara Malaysia (SAC), “Ruling on E-Money as a Shariah
Compliant Payment Instrument SAC’s 201st Meeting and 26th Special Meeting on 29 and 30 January
2020”.2020.
16
K. A. M., & Yusoff, A. F. J. (2022). Issues in the Application of Wakalah (Agency) in Ewallet.
International Journal of Academic Research in Business and Social Sciences, 12(11), 2476 – 2487.
17
Al-Qur’an (2:219)

7
E-Wallet is in accordance with the Shariah or not. There might be a situation where

the E-Wallet producer will misuse the funds for non-Shariah purposes.18 In the

current application, in an effort to attract users, E-Wallet producers will make

promotions by offering rewards for each ‘top-up’ in the E-Wallet. Then, the producer

(agent) will utilise the ‘top-up’ money from the principal in order to lend it to a third

party. The profit earned from the loan will be utilised to provide the profit incentives

such as cash back, prizes, discounts, and points to the users. Users do, however,

have concerns about the above mentioned profit incentives. Therefore, the second

issue that is crucial to be discussed is whether the status of the wakalah is valid or

not if the E-Wallet producer is involved in usurious transactions? Islam prohibits the

involvement of usury in transactions. In Surah Al Baqarah verse 275, Allah says “But

Allah has permitted trade and forbidden usury”.19 Next, in one of the hadith narrated

by Imam Ahmad, the Prophet (PBUH) was asked: “Which are the best forms of

income?” He replied: “The best earning is where a person earns through his own

efforts and all sales of transactions that are free from deception and cheating”.20 On

the other hand, Standard No. 23 of Accounting and Auditing Organization for Islamic

Financial Institution (AAOIFI) requires a wakalah to not be involved in a Shariah

banned practice, like trading in impermissible commodities or committing usurious

lending.21 From the above evidence, we can infer that Islam prohibits any

transactions which involve the elements of deception, cheating and usury which

result in one party in a transaction to gain more benefits from the other. According to

AAOIFI, in a money lending concept, it involves appointing an agent to manage

18
Asmadi et al., “Penggunaan E-Wallet Mengikut Perspektif Syarak.”,Jabatan Kemajuan Islam
Malaysia. 2020.
https://ciri.islam.gov.my/_msys/files/jurnal/16727_Penggunaan%20E-Wallet_Interactive.pdf
19
Al-Qur’an 2:275
20
Hadith Sahih Al-Bukhari
21
Accounting and Auditing Organization For Islamic Financial Institutions (AAOIFI), “Shari’ah
Standards”. 2015.

8
funds on behalf of the lender, but the arrangement aims to align with Shariah

practices, avoiding interest-based transactions. Therefore, the wakalah contract will

be illegal if it involves any usurious element since Islam clearly prohibits it.

CONCLUSION

In summary, the integration of Wakalah in Malaysia's e-wallet landscape has

undergone a transformative journey, driven by technological advancements and

government support .The regulatory endorsement by Bank Negara Malaysia in 2020,

which designating e-wallet transactions as Wakalah contracts,22 underscores the

commitment to Islamic financial principles. While the adoption of e-wallets has

facilitated transactions and enhanced financial inclusion, concern remains about its

compliance with Islamic financial principles, particularly concerning the issue of

permissibility of subject matter and the potential involvement for usurious practices.

All in all, in conjunction with the development of technologies, to tackle the

shariah issue within this study, government or banking sectors can implement robust

filtering mechanisms such as by developing and integrating AI-powered systems that

can automatically identify and restrict transactions involving non-Shariah compliant

goods and services. This could involve analysing keywords, merchant categories,

and transaction histories. By implementing these suggestions, e-wallet providers can

cater to a growing segment of Shariah-conscious consumers and contribute to the

development of a more inclusive, shariah compliance and ethical financial

ecosystem.

22
The Shariah Advisory Council of Bank Negara Malaysia (SAC). Ruling on E-Money as a Shariah
Compliant Payment Instrument SAC’s 201st Meeting and 26th Special Meeting on 29 and 30 January
2020, 2020.

9
 BIBLIOGRAPHY

Abdul Rashid, Khadijah Amira, Mohd Mahyeddin Mohd Salleh, and Mohd Soberi

Awang. “Concept and Application of Ijarah, Wakalah and Ji’alah Contract in the

Public Donation: A Comparative Study between Non-Governmental Organizations

(Ngos) in Malaysia.” Malaysian Journal of Syariah and Law 8, no. 2 (2020):

54–61. https://doi.org/10.33102/mjsl.vol8no2.255.

Accounting and Auditing Organization For Islamic Financial Institutions (AAOIFI),

“Shari’ah Standards”. 2015.Asmadi et al. Penggunaan E-Wallet Mengikut

Perspektif Syarak. Jabatan Kemajuan

Asmadi et al., “Penggunaan E-Wallet Mengikut Perspektif Syarak.”Jabatan

Kemajuan Islam Malaysia. 2020.

https://ciri.islam.gov.my/_msys/files/jurnal/16727_Penggunaan%20E-Wallet_I

nteractive.pdf

Bank Negara Malaysia. “Wakalah (Shariah Requirements and Optional Practices)

Exposure Draft,” 2013.

Celcom. (2021) . E- WALLET MALAYSIA: COMPARISON OF TOP 5 E-WALLETS IN

MALAYSIA2021

https://www.celcom.com.my/blog/lifestyle-technology/2021/e-wallet-malaysia-

comparison-of-top-5-e-wallet-in-malaysia-2021

K. A. M., & Yusoff, A. F. J. Issues in the Application of Wakalah (Agency) in Ewallet.

International Journal of Academic Research in Business and Social Sciences,

12(11), 2476 – 2487, 2022.

10
Md. Nor, M. Z., Naim, A. M., Muhamed, N. A., Mirza, A. A. I., Ahmad, A., Shukor, A.

R. A., & Ali, S. R. S. Legal issues in e-wallet practices. UUM Journal of Legal

Studies, 12(2), 229-252, 2021.

Qur’an 2:219

Saleem, Muhammad Yusuf. “The Contract of Agency (Wakalah).” Islamic

Commercial Law, 2012, 67–78. https://doi.org/10.1002/9781119198956.ch4.

Suhaimi, Maryam Sofia, Maryam Syamilah Fauzi, Noryatim Noryatim, Norashikin

Mohd Noh, Nursyamimi Shuhaimin, Qurratulain Jaafar, Siti Maspuah Maulan, Zati

Fatini Johan, and Aishath Muneeza. “Service Based Contract Used in Islamic

Finance: A Comparison of Hawalah, Wakalah, and Kafalah.” International Journal

Of Management and Applied Research 3, no. 4 (2016): 160–71.

https://doi.org/10.18646/2056.34.16-013.

The Shariah Advisory Council of Bank Negara Malaysia (SAC). Ruling on E-Money

as a Shariah Compliant Payment Instrument SAC’s 201st Meeting and 26th

Special Meeting on 29 and 30 January 2020, 2020.

Zuhayli, Wahbah, and Abdul Hayyie Kattani. Fiqih Islam wa adillatuhu. Jakarta:

Gema Insani, 2010.

11