Having read throughout the few weeks on how numerous countries are trying to position themselves as the financial hub for Islamic finance given the impressive growth of the industry at 15-20% per year (asset value), I cannot help but wonder if this is a good thing or will this come back to haunt us one day.
Undoubtedly, the growth of an industry whether in terms of assets or the introduction of new innovative products is encouraging, but there are numerous issues still left unanswered.
For one, there are Shariah issues in Bai Inah & Tawarruq considered controversial in some quarters, and perhaps considered the 'norm' in other countries. While the issues of these methods have been on-going for some time, but in my opinion, feasible alternatives to minimize their controversial aspects has been limited (e.g. the use of the LIBOR). Additionally, in the early decades of contemporary Islamic finance, scholars were said to allow some of these methods as a last resort or simply as a case of darurat (emergency), when no other alternatives are available.
Unfortunately, it appears that the darurat is still ongoing in the sense that these controversial mechanism are still the popular choice in banks. But whose fault is it? Is it the banks' fault which merely use these mechanism to maintain the status quo (no pain, no gain/ no collateral, no loan)? Is it the fault of scholars & jurists who cannot find or for lack of trying cannot find an alternative that is feasible? Is it the Muslim community's fault for mere ignorance, leaving the issue of faith in the hands of the bank without being the slightest bit curious on the Islamicity of the products?
The blaming game does not help. No one actually gains at the end.
What is needed, in my opinion, are 2 crucial actions.
1. A need for a 'masterplan'
Ok, perhaps the term 'masterplan' is a bit majestic but the need for the relevant Muslim jurists to come up with a step-by-step or gradual approach in moving forward towards an Islamic financial & economic system that truly serves the socio-economic goals of Islam is desired, if not critical.
Whether it's the OIC or the Fiqh Academy or any other global Islamic organization, I believe that it is time for Muslim financial & Shariah experts to sit down & come up with a timeline, with the sole purpose of identifying alternatives to Bai Inah, Tawarruq & other major issues.
I appreciate the difficulties of this especially in personal financing but certain steps can be done progressively in corporate or commercial financing (e.g. pilot tests on 'innovative' musharakah/ mudarabah). At this stage, you may ask...what innovative musharakah do I mean? At present, I am also still trying to feel my way through in Islamic finance & trying to seek solutions individually, which brings me to my next point.
2. A need to have an effective Islamic finance thinktank
In my limited time studying Islamic finance, I have not come across an Islamic finance thinktank that is truly active & passionately progressive in seeking the 'solutions' I mentioned above.
One person trying to seek feasible alternatives will not be as effective as a group of thinkers applying synergistic value with the same goal or intention in mind. The value of synergy, insya Allah (God willing) can produce thoughts & ideas quicker & more comprehensive than 1 person in an industry that is developing ever so rapidly.
One way for this thinktank to effectively work is to work with other jurists, scholars, economists & financial experts in conferences/seminars/workshops that are action or solution-oriented focusing on one fundamental issue at a time. Certain contemporary conferences, I feel, are so diverse that it appears that the organizers want to maximize the number of attendees. Though this is not a criticism but it does not help the cause of Islamic finance towards promoting socio-economic equity.
When all is said and done, essentially the concern that I have is that with these controversies still looming (and I'm not just referring to Bai Inah but others as well such as the way Sukuk is applied) & with the so-called growth of Islamic finance in mind, these issues will be entrenched in the roots of Islamic finance. It will trouble Islamic finance from within because it will become the 'status quo'. So entrenched will these controversial practices be within banks that changing them or attempting to convince financiers/jurists/those in authority to modify them will be all the more difficult.
At the end of the day, I sincerely hope we will be saved from being at 'war with God & the Prophet (Peace Be Upon Him)' as highlighted in the fourth set of revelations in the Qur'an on riba (interest):
From the Qur'an, Surah al-Baqarah, verse 275-81:
“Those who devour riba will not stand except as stands one whom the Evil one by his touch has driven to madness. That is because they say: ‘sale is like riba’, but Allah has permitted sale and forbidden riba. Those who after receiving direction from their Lord, desist, shall be pardoned for the past; their case is for Allah [to judge]. But those who repeat (the offense) are inhabitants of the Fire: they will abide therein (forever).” (2:275)
“God deprives interest of all blessings but blesses charity. He loves not the ungrateful sinner”
“Those who believe, performs good deeds, establish prayer and pay the zakat, their reward is with their Lord; neither should they have any fear, nor shall they grieve.” (2:277)
“O believers, fear God, and give up the interest that remains outstanding if you are believers”
“If you do not do so, then be sure of being at war with God and his Messenger. But, if you repent, you can have your principal. Neither should you commit injustice nor should you be subjected to it.” (2:279)
“If the debtor is in difficulty, let him respite until it is easier, but if you forego out of charity, it is better for you if you realize.” (2:280)
“And fear the Day when you shall be returned to the Lord and every soul shall be paid in full what it has earned and no one shall be wronged.”
Undoubtedly, the growth of an industry whether in terms of assets or the introduction of new innovative products is encouraging, but there are numerous issues still left unanswered.
For one, there are Shariah issues in Bai Inah & Tawarruq considered controversial in some quarters, and perhaps considered the 'norm' in other countries. While the issues of these methods have been on-going for some time, but in my opinion, feasible alternatives to minimize their controversial aspects has been limited (e.g. the use of the LIBOR). Additionally, in the early decades of contemporary Islamic finance, scholars were said to allow some of these methods as a last resort or simply as a case of darurat (emergency), when no other alternatives are available.
Unfortunately, it appears that the darurat is still ongoing in the sense that these controversial mechanism are still the popular choice in banks. But whose fault is it? Is it the banks' fault which merely use these mechanism to maintain the status quo (no pain, no gain/ no collateral, no loan)? Is it the fault of scholars & jurists who cannot find or for lack of trying cannot find an alternative that is feasible? Is it the Muslim community's fault for mere ignorance, leaving the issue of faith in the hands of the bank without being the slightest bit curious on the Islamicity of the products?
The blaming game does not help. No one actually gains at the end.
What is needed, in my opinion, are 2 crucial actions.
1. A need for a 'masterplan'
Ok, perhaps the term 'masterplan' is a bit majestic but the need for the relevant Muslim jurists to come up with a step-by-step or gradual approach in moving forward towards an Islamic financial & economic system that truly serves the socio-economic goals of Islam is desired, if not critical.
Whether it's the OIC or the Fiqh Academy or any other global Islamic organization, I believe that it is time for Muslim financial & Shariah experts to sit down & come up with a timeline, with the sole purpose of identifying alternatives to Bai Inah, Tawarruq & other major issues.
I appreciate the difficulties of this especially in personal financing but certain steps can be done progressively in corporate or commercial financing (e.g. pilot tests on 'innovative' musharakah/ mudarabah). At this stage, you may ask...what innovative musharakah do I mean? At present, I am also still trying to feel my way through in Islamic finance & trying to seek solutions individually, which brings me to my next point.
2. A need to have an effective Islamic finance thinktank
In my limited time studying Islamic finance, I have not come across an Islamic finance thinktank that is truly active & passionately progressive in seeking the 'solutions' I mentioned above.
One person trying to seek feasible alternatives will not be as effective as a group of thinkers applying synergistic value with the same goal or intention in mind. The value of synergy, insya Allah (God willing) can produce thoughts & ideas quicker & more comprehensive than 1 person in an industry that is developing ever so rapidly.
One way for this thinktank to effectively work is to work with other jurists, scholars, economists & financial experts in conferences/seminars/workshops that are action or solution-oriented focusing on one fundamental issue at a time. Certain contemporary conferences, I feel, are so diverse that it appears that the organizers want to maximize the number of attendees. Though this is not a criticism but it does not help the cause of Islamic finance towards promoting socio-economic equity.
When all is said and done, essentially the concern that I have is that with these controversies still looming (and I'm not just referring to Bai Inah but others as well such as the way Sukuk is applied) & with the so-called growth of Islamic finance in mind, these issues will be entrenched in the roots of Islamic finance. It will trouble Islamic finance from within because it will become the 'status quo'. So entrenched will these controversial practices be within banks that changing them or attempting to convince financiers/jurists/those in authority to modify them will be all the more difficult.
At the end of the day, I sincerely hope we will be saved from being at 'war with God & the Prophet (Peace Be Upon Him)' as highlighted in the fourth set of revelations in the Qur'an on riba (interest):
From the Qur'an, Surah al-Baqarah, verse 275-81:
“Those who devour riba will not stand except as stands one whom the Evil one by his touch has driven to madness. That is because they say: ‘sale is like riba’, but Allah has permitted sale and forbidden riba. Those who after receiving direction from their Lord, desist, shall be pardoned for the past; their case is for Allah [to judge]. But those who repeat (the offense) are inhabitants of the Fire: they will abide therein (forever).” (2:275)
“God deprives interest of all blessings but blesses charity. He loves not the ungrateful sinner”
“Those who believe, performs good deeds, establish prayer and pay the zakat, their reward is with their Lord; neither should they have any fear, nor shall they grieve.” (2:277)
“O believers, fear God, and give up the interest that remains outstanding if you are believers”
“If you do not do so, then be sure of being at war with God and his Messenger. But, if you repent, you can have your principal. Neither should you commit injustice nor should you be subjected to it.” (2:279)
“If the debtor is in difficulty, let him respite until it is easier, but if you forego out of charity, it is better for you if you realize.” (2:280)
“And fear the Day when you shall be returned to the Lord and every soul shall be paid in full what it has earned and no one shall be wronged.”
2 comments:
Assalamualaikum Umar A.
The Islamic Gold Dinar and Silver Dirham
Basically what you have said about is the problem of riba in Islamic banking. What Islamic Banking really is that is really is the same as conventional Banks. Its just cosmetics, at first I didn’t believe it but as I researched on it truly is the same (see the references given below). In the beginning some pseudo Islamic modern scholars ‘islamised’ capitalism and most of the Muslim world blindly followed suit. That is now we reach the problem of the financial products of Islamic Banks. Darurat cannot last forever, it is only a temporary measure.
Let’s say for one second that all Islamic Banks and their products are halal, absolutely no riba, now we come to the issue of money. Can electronic money (e.g. on banking accounts) and paper money be money? Paper money has no intrinsic value, the value is not in the money, and it is just pieces of paper with number printed on it. While electronic money is money stored in computers and can be created out of nothing! Yes out of thin air! We accept it blindly because it is legal tender, i.e. the government makes it the only form of money available.
It should be noted that paper money was a new creation, it appeared on the world stage only very recently during the French Revolution (late 1700s). Following the revolution most countries followed suit.
The question now is if Islamic Banking is really the same as normal Banks and paper money has no value what then is the alternative? Surely, there has to be an alternative to the present world riba interest based economy which Islamic Banks are apart of.
The answer is yes there is, some Muslims have ‘rediscovered’ what money really is in Islam and what the Banks really do. I won’t go into the details but the solution is the reintroduction of the Islamic Gold Dinar and Silver Dirham as currency. They are gold and silver coins that were used by the Muslim Ummah for more that 1300 years. Unfortunately, towards the end of the Osmanli Khalifate (Ottoman Empire), they began to follow Europe in using paper money.
The surprising question is that: we live in the 21st century and you want to use a gold coin to trade with one another? There are many answers to this question, one response is that Allah Law is eternal and not changing, it is we that have to change not Islam.
Of course, you will rarely find any news reported by the mainstream western press even local press for they are controlled. However, about 7 or 8 years ago after the Asian financial crisis, one of the most successful moderate Muslim leaders in Asia, other than our Beloved Sultan, the former Prime Minister of Malaysia, Mahathir Mohammed, realised the fraudulent nature of the whole international monetary system and called for a return to the Gold Dinar. The issue received a brief coverage in the media, for example see http://www.freelists.org/archives/news/03-2002/msg00060.html
Recently, there was a second conference on the Gold Dinar, the first being in 2001. It was held in KL last July, here is several reports of it http://www.theedgedaily.com/cms/content.jsp?id=com.tms.cms.article.Article_fb58171f-cb73c03a-180a8b70-4ecab139 and http://kickdefella.wordpress.com/2007/07/27/international-conference-on-gold-dinar-economy/ . Below are several other links concerning the Gold Dinar
http://www.islamicmint.com/islamicdinar/index.html, An excellent introduction to the gold dinar
http://www.shaykhabdalqadir.com/content/articles/Art037_12032005.html, A much more simple article to read on the Gold Dinar, there is also another longer Fatwa on the same website by Umar Pashsa under articles
http://www.imranhosein.org/content/view/103/1/ , Download the booklet, it is quite easy to read
http://en.wikipedia.org/wiki/Islamic_gold_dinar, Wikipedia summarises the Gold Dinar quite succinctly
http://www.larouchepub.com/other/2002/2944gold_dinar.html, This is another article
My first ‘contact’ with the issue on Banking and its solution, the Gold Dinar was when I read Umar Ibrahim Vadillo’s books The Esoteric Deviation in Islamic and The Return of the Islamic Gold Dinar. Both books are of great importance to this present age we live in, especially the former. These books were available at Soulitude, The Mall, but unfortunately Solitude has closed down. Maybe Bismi has it you might check. I am seriously thinking of setting up a blog of my thoughts on Gold Dinar and riba.
La Hawla Wa La Quata Illah Billah- The is no Power or Strength Except by Allah.
Salam,
A. Muhd
Waalaikumsalam Awang,
Yes, I agree with you that Islamic banking, as it is in practice now, is largely and unfortunately has minimal differences than conventional banking...but I believe there are some things that can be done.
Secondly, on the dinar bit...I have come across a book on it but I did not read much on it. Insya Allah, I'll read up more on it as time allows . My current curiousity or question is how can the dinar solve the Islamic banking dilemma? Let me know if & when you have the blog up.
Thanks for the links.
Post a Comment