SS 55 · Financing operations

SS 55: Competitions and Prizes

What this standard is about

Banks and companies run competitions, prize draws, and promotions to attract customers. This standard sets the Shariah rules for all of that: what counts as a competition, who may fund the prize, and how institutions may organize or sponsor these activities.

A competition here means a contest between two or more parties to determine who is best. The standard covers three areas: competitions themselves, competitions with prizes (whether the prize comes from the competitors or from an outside sponsor), and the organizing or sponsoring of competitions by institutions.

It does not cover staff performance bonuses, job-related contests, reverse auctions, or reward-for-work (ju'alah) arrangements outside competitions.

Why it exists

Prize draws and promotions sit close to gambling (maysir), which Islam forbids. A draw where participants pay to enter and only some win can look like a lottery. At the same time, legitimate marketing and skill-based contests are part of normal business. AAOIFI issued this standard, one of its most publicly relevant, so that institutions and ordinary customers know exactly where the line is.

The key rules, simply put

A competition is a contest between two or more parties to determine the best among them.
Prizes may be funded by an outside party such as the sponsoring institution, or by one of the competitors. Funding by more than one competitor is not allowed.
Institutions may organize or sponsor competitions, subject to the standard's conditions.
Promotional draws must not amount to gambling. Entry must not be a payment for a mere chance to win.
A discount coupon that also enters the buyer into a prize draw is allowed, subject to the rules on draws.
Loyalty programs that award points for purchases are allowed when joining is free.
If a loyalty program charges a subscription fee purely for discounts and prize entry, that is not allowed. If the fee pays for real services and benefits beyond discounts, it is allowed.
A customer who is short a few points may buy the missing points for cash to complete a purchase, because that payment is treated as part of paying for the goods or services.
Employee and client performance incentives, job contests, and reverse auctions are outside this standard's scope.

An everyday example

A bank runs a draw: every customer who opens a savings account gets one entry to win a car, with no entry fee. Under this standard, this is permissible promotion, because customers pay nothing for the chance and the prize comes from the bank as sponsor. If instead customers had to pay a fee just to enter the draw, it would cross into forbidden gambling.

Words to know

Maysir — gambling; any game where money is staked on pure chance. Forbidden in Islam.
Ju'alah — a reward promised for completing a specified task.
Reverse auction — a contest where sellers compete to offer the lowest price.

Source

AAOIFI Shariah Standard No. 55 — https://aaoifi.com/wp-content/uploads/2020/07/SS-55-Competitions-and-Prizes-.pdf