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FACULTY OF BUSINESS

Nurturing professionals with high moral and ethical values.

World Congress on Islamic Systems 2012

World-Islam 2012
17-21 Muharram 1434H / 1-5 December 2012 Grand Riverview Hotel, Kota Bharu, Kelantan, Malaysia

Islamic Banking Is Not Islamic?


The Implementation of Islamic Banking and Finance in Malaysia

FACULTY OF BUSINESS
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INTRODUCTION

Islamic Finance is already been accepted by the finance and banking today Financial Institutions regardless of the staffs religion involve in the implementation of IF Products and services were offered to cater the needs of the people.

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`AQIDAH (Faith and Believes)

ISLAM

SHARI`AH (Rules and Regulation Safeguarding practices, activities, and interaction)

AKHLAQ (Personalities, Behaviors, Moralities, and Ethics)


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ISLAMIC ECONOMY

Roughly 20% (2.013 b) of 6 b world's population is Islam Total assets within the Islamic banking industry are presently (2010) estimated to exceed $1 trillion Muslim wealth is estimated at USD3 trillion Islamic financial institutions more generally are continuing to experience substantial growth in business turnover.

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FINANCIAL INTERMEDIARY

Financial institutions act as intermediary to bridge savings-deficit units (SDUs) and savings-surplus units (SSUs). Financial intermediary offer a product (bond/sukuk) to SSUs and product (debt and equity financing) to SDUs).

FACULTY OF BUSINESS Mohd Fuad 2012


Nurturing professionals with high moral and ethical values.

ISLAMIC FINANCE

Financial systems that operate strictly according to shari`ah (Islamic Laws) and Islamic Mu`amalah. Follow strictly the teaching of Islam whiac is based on al-Quran and as-Sunnah, the word and act of Prophet Muhammad PBUH.

FACULTY OF BUSINESS Mohd Fuad 2012


Nurturing professionals with high moral and ethical values.

ISLAMIC FINANCE

The uniqueness of Islamic Laws lies on the comprehensive principles and its validity for all time (Mannan, 1998). Maududi (1983) explained that the main objectives of Shari`ah (maqasid as-Syari`ah) are to nurture and build human life based implementing good deeds (marufat) and eliminating the evil acts (munkarat).

FACULTY OF BUSINESS Mohd Fuad 2012


Nurturing professionals with high moral and ethical values.

GENERAL PRINCIPLES IN ISLAMIC MU`AMALAH

All exchange should be with consent of the parties concerned Full ownership and eligibility of the contractual parties voluntary, no misstatements and no mistakes The contract object must be clearly mentioned: the types, the amount, can be surrended, useful and clean (pure) according to Islamic Shari`ah

FACULTY OF BUSINESS Mohd Fuad 2012


Nurturing professionals with high moral and ethical values.

GENERAL PRINCIPLES IN ISLAMIC MU`AMALAH

Free from riba, game of chance (al-maisir), preventable ambiguity or uncertainty (al-gharar) and other prohibited action Free from oppression: excessive profit (Ghabn alFahsy), hoard (Ihtikar), blockade from the market (Talaqqi al-Rukban). Profit bear risk (al-Ghunmu bi al-Ghorm) risk sharing

FACULTY OF BUSINESS Mohd Fuad 2012


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MALAYSIAS PRACTICE

Establishment of Shari`ah Committee in Islamic Banks Establishment of Shari`ah Council at Bank Negara Rules and Regulation under Islamic Banking and Finance Act (1983) Formation of Shari`ah Department Development of products and services Offering of products and services

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FACULTY OF BUSINESS Mohd Fuad 2012


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MALAYSIAS PRACTICE

Shari`ah compliance base: i) Free from riba, ii) Game of chance (al-maisir), iii) Preventable ambiguity or uncertainty (algharar)

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THE DISCUSSION

This paper will limit the discussion into three areas: i. Principle of al-Ghunmu bi al-Ghorm, ii. Principle of voluntary. iii. Wa`ad in contract.

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THE FINDING
Musharakah Mutanaqisah 1. 100% financing 2. Cash back 3. Wa`ad to be implemented in the case of default and total loss 4. Wa`ad to be signed to enable the release of payment to customer 5. Wa`ad was revised to secure the interest of bank and financial institution.

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FACULTY OF BUSINESS Mohd Fuad 2012


Nurturing professionals with high moral and ethical values.

DISCUSSION
100% financing where is the contribution of customer? 2. Cash back the total exceeded 100% - how can it happen? 3. Wa`ad to be implemented in the case of default and total loss transfer of risk from bank to customer thus violated the principle of al-Ghunmu bi al-Ghorm and free from oppression: excessive profit (Ghabn alFahshi) bank is always at the safe profit and side.
1.

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Nurturing professionals with high moral and ethical values.

DISCUSSION
Wa`ad to be signed to enable the release of payment to customer under duress thus violated voluntary principle. 5. Wa`ad intention is to secure the interest of bank guaranteed profit (riba?)
4.

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Nurturing professionals with high moral and ethical values.

CONCLUSION
If all the proceeding activities are still exist and being practiced then Islamic Bank isnt Islamic.

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Nurturing professionals with high moral and ethical values.

SUGGESTION
Shari`ah committee to carefully monitor 2. Shari`ah Department to carefully assist 3. Shari`ah Council to carefully approve the appointment of Shari`ah Committee member 4. Heading towards Shari`ah Based, no more Shari`ah Compliance.
1.

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FACULTY OF BUSINESS
Nurturing professionals with high moral and ethical values.

FURTHER DISCUSSION

Shari`ah based? Difference with Shari`ah Compliance

FACULTY OF BUSINESS
Nurturing professionals with high moral and ethical values.

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FACULTY OF BUSINESS
Nurturing professionals with high moral and ethical values.

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