Lending Industry: The Cancer to Social Justice ± Lending for Profit Unconformity to the True Essence and Spirit

of Islam (TESI)

AZIM SALIMI BIN LUKMAN CHA 080 019 FACULTY OF BUSINESS AND ACCOUNTANCY UNIVERSITI MALAYA

Lending Industry: Cancer to Social Justice This paper is looking at how lending for profit (i.e. usury or Riba¶) would impact the society and nation of Malaysia based on Islamic Perspective. Introduction: The Present Malaysia Malaysia is an Islamic nation with Islam as the official religion in this country. Majority of Malaysians are Muslims that practice Islam as the way of life which started when Islam arrived to Tanah Melayu in 1303 (Anonymous, 2009). In reality, Malaysia practices dual economy system that implements both Conventional Economic System (CES) and Islamic Economic System (IES) which is believed to be well adjusted in the economy (Lehar, 2007). However, evidence indicated that Capitalist Riba¶ System from CES will never bode well with the true IES because Riba¶ is forbidden in Islamic teachings. In fact, the physical and material improvement seen in any economy using CES would eventually lead to catastrophic problems for the society (P. M. N. Ismail, 2011). In short, striving for Social Justice is impossible under dual economy where one promotes Riba¶ and the other prohibits it. Even if Islamic Banking System (IBS) is developed to strive for an ideal Islamic practice in Malaysia, the usage of Riba¶ at the core platform of economy would simply negate the aims of IBS to achieve the ideal Islamic concept into practice. In other words, Malaysia practice of CES allows the capitalist riba system (M. N. Ismail, 2011) which inhibits the true practice of IES.

History For thousands of years the practice of Riba¶ (or usury) was looked upon as evil. Historically, all major religions condemn the practice of charging any interest on loan(Ismail, 2007). However, in the 15th century, some thinkers began to promote the idea that an interest rate of 5% was harmless and as long as the intention was to help each other, then they become legal. In 1545, John Calvin supported the idea that lending for small usury is acceptable. By 18th century, lending at interest becomes normal practice. Nevertheless, in Islam, the prohibition of interest is clearly indicated in the Quranic verses of Chapter 2: 275, Chapter 2: 276, Chapter 2: 278, and Chapter 2: 279. Thus, the legalize practice of lending for profit or usury is a relatively recent phenomenon as far as human history is concerned (Ismail, 2007). Reality of Practice in Malaysia In Malaysia, our society was born in an environment where lending for profit is legalized. As such, the practice of Riba¶ becomes part of natural way of life even though Islam forbids it (Kharufah, 2008). There are many groups that promotes lending for profit and practice of Riba¶ into every nations which leads to highly indebted nation (Perkins, 2006). Based on those efforts, lending industry and charging of Riba¶ were successfully embedded as natural practice for any country to achieve rapid economic growth. The vision that high economic growth promotes success in any society has been cultivated in many nations including Malaysia which began by inducing the government to take up loans (Perkins, 2006). However, some scholars are against this vision of promoting lending for profit since such trick simply leads to the path of destruction for mankind (P. M. N. Ismail, 2011; Kharufah, 2008). As a result of practicing lending for profit, highly indebted society is created and many Malaysians below the age of 30 have been declared bankrupt (Ramachandran, 2011). Due to this problem, many efforts have been developed to solve this problem such as tighter credit card rules (Damodaran & Singh, 2011; Singh, 2011a, 2011b), hunting loans via online (Salleh, 2011), debt management programs (Anonymous, 2011a) and helps by debt management agency (Anonymous, 2011b). However, it seems that debt problems cannot be truly resolved except with the removal of lending industry and practice of Riba¶ from the economy (P. M. N. Ismail, 2011). Instead of resolving the issue of debt, sustaining a Capitalist Riba¶ System lead to many other issues including monopoly practice that leads to extravagant housing prices(Arifin, 2011; Kongster, 2011). Furthermore, it is reported that debt problems also raise the number of suicides in Malaysia (Mokhtar, 2011; Sivanandam, 2011). In addition, Malaysia also experiencing several of other serious social problems such as adultery, prostitution, illegal street races, rapes, incest and other sexual crimes. It seems that our society have lost the values and teachings of religion specifically in Islam. Absence of faith in the heart of man (and woman) has caused them to act against the Islamic teachings and values. This has resulted in drastic increase in children being born out of wedlock (Augustin, 2011; Augustin & Lee, 2011). Moreover, issues of abandoning family members and parents into the streets is increasing in numbers (Babulal, 2011). An alarming example of our society losing good values can be seen in a case where a vehicle carrying RM70000 in coins overturned and road users risking their life in the middle of North-South Expressway to steal those coins (Abas & Chun, 2011). Clearly, the reality of practice in Malaysia has been straying far from putting Islam as a way of life. In fact, Islamic Banking System (IBS) in Malaysia seems to be losing from practicing the real values of Islamic teachings into their products (Nienhaus, 2011a). A true IBS should possess the same values in Islamic teachings or the True Essence and Spirit of Islam (TESI).

To explain further, the next subtopic will talk on the matters relating to the True Essence and Spirit of Islam (TESI) and how it affects the division of IBS products to be Shari¶ah Based and/or Shari¶ah Compliant. TESI: Shari¶ah Based vs. Shari¶ah Compliant Basically speaking, in Islamic teachings, everything in Islam adheres to the goals which Islam strives for such as achieving the ideal living, social justice and peaceful society on this earth. In doing so, practically all elements of Islam possesses the True Essence and Spirit of Islam (TESI) which means that everything in Islam must be in line with the Spirit of Islamic Teachings that is bringing goodness and avoiding harm for mankind. There is no such thing in Islam that would bring direct harm or causing problems for man (and woman) to live life on this earth. Everything in Islam has its purpose as everything that Allah SWT creates on this earth has its purpose in life and in the path of destiny and fate from Allah the Almighty. In cases where man cannot truly comprehend behind the true purpose of something in this earth, man is commanded by Allah SWT to simply accept it by faith. We need to belief in Allah SWT and have faith that everything that occurred in this world and beyond is with the Will of Allah SWT and it has been destined to happen as Allah SWT Wills it. There is no need for man to doubt Allah SWT or even blame Allah SWT to be unfair because we are the ones who lacks the knowledge to truly comprehend the Knowledge of Allah SWT behind everything that has been meant to happen to man. We need to accept that everything which occurred is based on the fate that Allah SWT Wills it (al-Qarni, 2002). To conclude, every element in Islam should possess TESI which would prove that such element (be it products or concepts in Islam) would be a Shari¶ah Based element. For example, the concept of trading known as al-Mudarabah is a concept that possesses TESI and is a truly Shari¶ah Based concept. Here, Mudarabah enables Muslims and non-Muslims alike to practice a fair trade in life where the Mudarabah concept promotes fairness, honesty and helping the brotherhood which encourages the economy to move forward towards achieving social justice. Hence, Mudarabah (in its true sense and concept) possesses TESI and is a Shari¶ah Based concept to be practiced in real life. On the other hand, if we look at today¶s practice of implementing concepts replicated from conventional economy such as Bai¶ al-µInah, it can be considered as Shari¶ah Compliant product because it is merely measuring the product from the Islamic method perspective. In another term, Bai¶ al-µInah can be Islamic Compliant product because it is using the same technical concepts that are practiced in Islam. However, if we look whether Bai¶ al-µInah is in accordance with the spirit of Islam such as possessing the spirit of Islam or TESI, then surely it would fail. In essence, the Bai¶ al-µInah product does not possess TESI which promotes helping amongst brotherhood, striving for social justice and promoting fairness. This is because its core element in Bai¶ al-µInah is clearly the concept of lending money where profits (Riba¶) for giving such loan can be derived. In doing so, lending money with usury clearly deviates from the spirit of Islam (TESI) where it does not help the brotherhood but rather taking advantage of those in need. In addition, it does not promote social justice because the rich keeps on getting richer (by giving loans and charging Riba¶) on the poor which leads them to a more desperate situation (for having to take loans and pays Riba¶ on the loan). In the end, it does not promote honesty and fairness because the core element of lending with Riba¶ is clearly the practice of oppressing the poor and taking advantage of the needy. Clearly, it does not support the true teachings of Islam and does not possess TESI. In conclusion, Shari¶ah Compliant Products may or may not possess TESI which mean it can be Shari¶ah Based or not. However, a product or concept that is Shari¶ah Based

would surely possess TESI and would absolutely be Shari¶ah Compliant. The difference between the two is that Shari¶ah Based products is what Islam wants because it possesses TESI whereas Shari¶ah Compliant product is uncertain since it can be beneficial to society and at the same time creates harm for the society. In short, it would be best for Islam and all mankind for scholars and experts to start focusing on Islamic Based products and concept that possesses TESI instead of threading the path of uncertainty with Islamic Compliant Concepts! In fact, to venture further and deeper into this argument to support Shari¶ah Based concepts that possesses TESI, the next subtopic will discuss on the several arguments on this premise. Evidence of TESI: The Intention of Islam and in Islamic Teachings The first hadith from the Prophet Muhammad SAW is translated as: The end does not justify the means (Ahmad, 2011). It means that the concept of Robin Hood is not acceptable in Islam. In other words, Islam does not allow any person to commit crime or forbidden things in order to achieve something good or doing bad things with a good intention behind it. In fact, the understanding of TESI to be the core practice which ensures any activities in Islam (or as a way of life) will be in according to the true teachings and intentions of Islam. With TESI as the core elements of anything and everything, whatever it is (be it theory, concept, idea, activity or actual practice) in one¶s life shall be in line with the real teachings of Islam and it will be Islamic Based (Figure 1.1 and 1.2). In doing so, any activities in man¶s life shall be adhering to Islam from the second man open his eyes until the eyes are closed (where even sleeping will be in accordance to Islamic teachings). Thus, the whole action in man¶s life (including the beating of his heart and every breath that he takes) become a practice of Ibadah (act of worship) to Allah SWT. It means, a man will live his life while practice Islam as his way of life without segregating anything in his life from Islam such as politics, work, business transactions, marriage, health, lifestyle and even death-style (i.e. the way the person die). In fact everything will be ibadah and every action and intention will be rewarded by Allah the Almighty. Again, it shows how TESI is an extremely vital element for a man to live life as a true Muslim and in practicing Islam as a way of life. For example, if a man becomes a business person, he will be honest, fair and adhering to Islamic teachings in conducting his business activities. If a man works as a street cleaner, he will do his best to fulfill his duty without trying to cheat or be lazy, knowing that his work is considered as Ibadah to Allah SWT. In short, everything that the man does will be Ibadah and thus, he will be honest, fair and abiding to the teachings of Islam (i.e. TESI). Perhaps, the best way to practice TESI into the core of our life is to understand the intention of Islam which can be derived from the Quran and Hadith. In fact, understanding and practicing both sources would equip a man adequately to achieve success in this life and in the hereafter. Proper knowledge is required to learn and understand these sources of Islamic teachings. As pursuant of knowledge is highly encouraged in Islam, it is our duty to equip ourselves with as much knowledge as we are capable so that we can strive to be the very best that Allah intends us to be. Hence, man should follow the teachings of Islam not by methodical form or following blindly word to word but instead, man should learn to understand the true Islamic values from Islamic teachings (TESI) where by doing so, man can live life as a true Muslim (in line with the true values of Islam or TESI). To elaborate further, I will use several case example where man tries to use shortcut or µhelah¶ (trickery) which tries to avoid or goes beyond the true practice of Islam.

Helah - Example 1: Eating during Ramadhan to avoid punishment of committing sex This refers to the act of eating during the day on fasting month of Ramadhan to avoid payment of Kafarat Jima¶ (i.e. punishment of committing sex with spouse). According to Sufyan Ats-Tsauri, Ibnu Al-Mubarak and Ishaq, payment of Kafarat Jima¶ is applied because such act violates the dignity of Ibadah (i.e. fasting). In other words, a helah or trickery to avoid punishment is strictly prohibited in Islam (At-Tirmidzi, 2006a). Helah - Example 2: Marriage with intention to divorce a woman enabling the first husband to remarry This practice is where a man marrying a woman with intention to divorce her, or the marriage intention is to allow the first husband to remarry her. According to Hadith by Abu µIsa At-Tirmidzi, the Prophet SAW despises person who perform this practice (which is also known as µCina Buta¶). In sum, Islam forbids such helah or trickery which include putting a requirement (to divorce) into a marriage where such marriage is void (At-Tirmidzi, 2006b). In essence, Islam does not allow man to devise any trickery or helah to cheat or maneuver through the original ruling of Islamic practice and teachings. Islam does not allow man to surpass the original ruling and override the real values of Islamic teachings (TESI). This act of trickery or helah is very clearly haram and forbidden in Islamic teachings according to many Scholars and Experts in Islam (Kharufah, 2008). Be it in daily practice or even in any industry specifically referring to the practice of Islamic Banking System (IBS) in Malaysia. Any helah or trick applied to allow the concept of lending for profit is strictly prohibited by Islam (i.e. Bai al Inah or Structured Tawarruq). However, in today¶s practice, something has gone amiss and wrong because many of our current industry is committing helah and trickery in many aspects of our life as a Muslim. Why are we µhere¶? Factors contributing to the key issues We are µhere¶ that is living in a life where trickery and helah prevails over the truth from Islamic teachings. Many people have asked the question of why? To answer the question of why, we should look into several key elements that plays major role of how we arrived at how we live our live today. Is it by choice or is it simply fate?

1. History ± Bleak knowledge and Planned Damnation - Historically, our society do not possess deep understanding on Islamic teachings as well as complicated plans to embed our nation with high debt via lending industry(Perkins, 2006).

2. Misconception of Islamic Understanding - In addition to above (point 1), lack of knowledge has led our society to misinterpret Islamic teachings (Yahya, 2001) and

thus, many values that is prohibited by Islam are still practiced including khurafat belief, syirik and practice of Riba¶.

3. Conventionalization of IBS - Many of IBS in Malaysia is moving towards Conventional practices (Nienhaus, 2011b) and less on true Islamic values (TESI).

4. Specialist Scholars (no BPT / Big Picture Theory) - Many Scholars are too specialized in their respective field where they cannot see the big picture that transcends beyond several field of knowledge (Makky, 2009).

5. Methodical Practice (no TESI) - Most Scholars in IBS are too focused on creating Shari¶ah Compliant Method for their product while ignoring the true essence and spirit of Islam (TESI) in that product so that it can be truly Shari¶ah based product (Siddiqui, 2011).
Figure 1.0 below would indicate the present problems in Malaysia and further discussion will be made under the next subtopic. Key Issues and Problems (Figure 1.0)

1. Knowledge Lacking (Anti TESI) - Inadequate knowledge is one key issue which is the opposite of True Essence and Spirit of Islam (TESI). This can be changed by making time to learn (point C) to increase our knowledge.

2. Mis-prioritization: Anti Maqasid al-Shari¶ah - Due to this issue of knowledge lacking, another problem arises that is the problem of mis-prioritization of objectives in life. This is exactly an essence of anti Maqasid al-Shari¶ah.

3. Non-conducive Environment: Anti Islamic Way of Life - Due to the failure of following the Maqasid al-Shari¶ah, it creates an environment that is non-conducive for man to practice the real values and spirit of Islam as part of their life. In other words, it is against the Islamic way of life or considered as anti Islamic way of life.

4. Lawless and Chaotic Living ± Too busy to learn - Since we are already living in a lawless and chaotic life, we are caught in the vicious cycle that prevents many men from allocating time to learn about Islam and other knowledge.
Reflection: What should be done?

1. Begin with Own Self: Time to Learn (TESI and BPT) - According to one scholar, the best way or the most important key that will trigger the change in life is to change the heart of man from bad to good. It is according to the verse ArRa¶d 13:11 of Quran which explains how Allah SWT will change the fate of man because of the change in the heart of man from bad to good (Latiff, 2011).

2. No Debt Campaign: Begin with Self (Qana¶ah) (e.g. No debt to start business)

- To put the faith in Allah SWT into practice by following truly with Shari¶ah, man should try everything in his power to avoid any debt which means it is following the Islamic teachings that practices Qana¶ah (the feeling of adequate) in man¶s life. - No Debt Campaign means that any form of debt whether it is riba¶ based or not should be avoided and man should live within his means in life.

3. Focus on Real Economic and Productive Activities rather than µair business¶ - In addition, man and institutions (i.e. the government and private organizations) should focus on venturing in business which covers on real economic and productive activities (Nienhaus, 2011b) as compared to going for µair business¶ (i.e. venturing in shares, derivatives, bonds and so forth which does not directly create employment or directly benefit the society).

4. Go for Real and Natural Growth ± Not the drastic and artificial growth (Double digit figures) - By implementing real economic and productive activities, we could expect for real and natural growth in our economy. High income nation and double digit growth do not guarantee harmonious life for society (P. M. N. Ismail, 2011).

5. Shun the race to have the fastest economic growth, let it be natural - Again, by accept real and natural economic growth, man could be able and should be able to shun the race of being the

fastest economic growth of a nation. In doing so, we could live a natural pace of life and a very peaceful way of living.

6. People and society should avoid debt, choose the long cut and hard life (the true Islamic way of living with TESI embedded) rather than taking short cuts and easy life which leads to high debt society, high debt nation. Soon, as demand declines, supply will be forced to change where IBS is forced to be truly Islamic (TESI).

7. People with Means should began practicing real Islamic values (TESI) in their business - In the end, for man or any institution which owns enough capital or has some amount of money, they should involve in business that possesses TESI. This will become sub-economy that implements TESI which is in line with Shari¶ah (Ahmad, 2011).
Conclusion Lending Industry is the real cancer to the current problematic living lifestyle of man. It exacerbates and worsens the current misconception living of Muslims in the present world. The only solution to stop this cancer (i.e. Lending Industry) is to start with our own self by changing our heart from bad to good as stated in Quranic Verse 13:11 (Latiff, 2011). Change our practice to be truly Islamic (TESI) and soon with adequate knowledge, man shall start to see the Big Picture of things in life (Big Picture Theory or BPT). Even the change in government will not solve our problem if lending industry and practice of Riba¶ is allowed to stay. Being a cancer to social justice that impedes the true values of Islam (TESI and BPT) from shining, lending industry should be utterly abolished. This gigantic goal should start with one simple step of gaining knowledge and putting it in practice. Put the power back into the people (specifically individuals) to trigger the start of change towards the path of TESI (i.e. the true path of Allah SWT). I believe that as soon as each of us starts doing our bit, whether it is truly successful or not will rely on Allah¶s Will. The most important thing is that each of us has tried our very best to the utmost of our effort to make TESI cultivated on this earth. References

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