In today's world, “Buy Now Pay Later” (BNPL) services have become a popular way to shop, providing consumers with the flexibility to spread payments over time. While BNPL may seem like a recent innovation, the concept of purchasing on credit dates back thousands of years. Its journey through history is intertwined with ancient business practices, medieval innovations, and even the ethical frameworks of Islamic finance, which have significantly influenced credit systems in the Middle East and beyond.
Old credit assets
BNPL began to be practiced in the markets of ancient civilizations. In Mesopotamia (around 3000 BC), merchants allowed trusted customers to buy goods on credit, and record transactions on clay tablets. This early form of credit was built on trust and community, laying the foundation for organized lending.
Similar practices were observed in ancient Egypt, where farmers borrowed seeds for planting and paid off debts with part of their crop. These informal credit systems were essential to support agricultural economies.
Islamic contributions to moral credit
As trade routes expanded throughout the Middle East, Islamic principles profoundly shaped credit systems. The ethical framework of Islamic finance emphasized fairness, transparency and avoidance of exploitation — values that are in line with the needs of booming markets.
One prominent example is the concept of Murabaha, where the seller discloses the cost of the item and agrees to the markup with the buyer. This markup constitutes the total price paid in installments with no hidden fees or interest (usury), which is prohibited by Islam.
Murabaha reflects the trust and transparency inherent in Islamic commerce. This practice is still widely used in Islamic banking today, providing an ethical alternative to interest-based credit systems.
In the medieval cities of Cairo, Baghdad, and Damascus, markets thrived on these principles. Merchants provided credit to buyers on clear and ethical terms, ensuring fair treatment while promoting economic growth. This business approach has affected European credit systems as these ideas have spread through Islamic trade networks.
Medieval commerce and the spread of credit systems
With the arrival of Islamic trade networks in Europe, they introduced ideas that shaped Western financial practices. During the Renaissance, merchants in Italian cities such as Venice and Florence adopted instruments such as promissory notes — early forms of credit instruments that allowed buyers to defer payments. These tools reflect the justice and accountability inherent in Islamic credit systems.
Meanwhile, within the Middle East, credit arrangements remained rooted in personal relationships. A handshake or a reputation for honesty often carries more weight than formal contracts, confirming a culture of trust in commerce.
The industrial revolution and installment payments
With the industrial revolution, credit systems have evolved to meet the requirements of a rapidly industrializing world. Mass production has made goods such as machinery, furniture, and home appliances more widely available but also more expensive. Companies have introduced installment plans, allowing customers to pay over time.
For example, Singer Sewing Machines and Ford Motors used installment models to make their products accessible to the growing middle class. These regulations served as a precursor to the modern BNPL, although they often involved interest or fees, in contrast to the transparent practices of Islamic finance.
BNPL's revolution in the digital age
The emergence of the Internet in the late 20th and early 21st centuries changed commerce. E-commerce has created opportunities for new payment methods, and BNPL has emerged as a major innovation. Companies like Klarna, Afterpay, and Tabby in the Middle East have allowed consumers to shop online and pay in interest-free installments.
BNPL platforms have become especially popular among younger generations looking for alternatives to traditional credit cards. Its simplicity and transparency have resonated with consumers in the Middle East, where the principles of Islamic finance often shape financial behavior. For example, Tabby operates throughout the GCC, offering flexible payment options in line with Islamic finance values.
The impact of COVID-19 on BNPL adoption
The COVID-19 pandemic has accelerated BNPL adoption as consumers have turned to online shopping. In the Middle East, BNPL services have expanded into industries such as fashion, electronics, and even travel. The region's residents, who are digitally connected and mostly young, have found BNPL to be the practical solution for managing finances in uncertain times.
For businesses, BNPL has become a tool to increase sales and expand customer bases. Retailers benefited from higher conversion rates, while consumers appreciated the flexibility of distributing payments without incurring high fees.
Islamic principles in modern BNPL
While BNPL's global platforms focus on ease of use, those operating in the Middle East often incorporate elements of Islamic finance to meet regional expectations. BNPL's Sharia-compliant models avoid interest and rely instead on profit sharing or fixed fees. This ensures transparency and is consistent with the ethical foundations of trade in the region.
For example, BNPL models inspired by Murabaha Disclosure of profit margins in advance, removing the ambiguity often associated with traditional credit systems. This combination of modern convenience and ethical rigor makes BNPL an attractive choice for consumers in the Middle East.
The future of BNPL: returning to commerce and industry
As BNPL continues to grow, its ability to reshape commerce extends beyond consumer purchases. Businesses are increasingly adopting B2B BNPL solutions, providing suppliers and buyers with the flexibility to manage cash flow and access credit in ways that feed commerce and industry.
This shift towards B2B BNPL is closely aligned with the historical roots of credit, which focused on facilitating trade rather than consumer spending. By enabling companies to buy raw materials, invest in growth, or manage seasonal cash flow gaps, B2B BNPL supports macroeconomic growth.
B2B BNPL often operates under clear and interest-free terms, making it more compatible with the principles of Islamic finance. These solutions emphasize equity, trust, and mutual growth, and echo the practices of early Islamic merchants.
BNPL and Saudi Vision 2030
BNPL's capabilities align seamlessly with Saudi Vision 2030, which aims to diversify the economy and promote entrepreneurship and innovation. By facilitating trade and enabling the growth of small and medium enterprises, BNPL solutions such as Tabby for businesses can help Saudi companies manage cash flow flexibly, enabling them to focus on innovation and expansion.
Ultimately, the future of BNPL in Saudi Arabia is about more than convenience — it's about building a more dynamic and inclusive economy. By combining digital innovation with ethical values, BNPL can transform commerce and unleash the entrepreneurial spirit that drives Vision 2030 forward.
