Professional Documents
Culture Documents
(MIFB 6023)
CHAPTER 1
What do you think of the pictures that you are going to see?
MUAMALAH (Man-to-man)
POLITIC ACTIVITIES
ECONOMIC ACTIVITIES
SOCIAL ACTIVITIES
ON
Islamic Banks
Commercial Banks
Finance Companies
Merchant Banks
Discount Houses
Islamic Banks
Commercial Banks
Investment Banks
10
Savings Institutions
Other Financial
Intermediaries
11
Capital Market
Derivative Market
12
13
14
BANKING
TAKAFUL
EQUITY MARKET
FINANCING
TAKAFUL
RETAKAFUL
EQUITY MARKET
BOND MARKET
BANK NEGARA MALAYSIA Islamic Banking Act 83 Banking & Financial Institution Act 89
Islamic Banking 11 Islamic banks 2 domestic Islamic banks 6 Islamic subsidiaries 3 foreign banks
Source: Bank Negara Malaysia Financial Stability and Payment Systems Report 2006
16
ISLAMIC BANKING 5. SHARIAH COUNCIL / ADVISOR 6. SHARIAH COMPLIANT PRODUCTS** 7. DEBT & EQUITY BASED PRODUCTS 8. CIVIL COURT ( ISLAMIC/CIVIL LAW)
6. N/A
1983-1992
Lembaga Tabung Haji ( 69) Bank Islam Malaysia Berhad ( 83) Syarikat Takaful Malaysia Berhad ( 84)
18
1993-2002
Islamic Banking Scheme ( 93) Islamic Inter- bank Money Market ( 94) Association of Islamic Bank in Malaysia ( 95) Asean Retakaful International (L) Ltd Labuan ( 97) Bank Muamalat Malaysia Berhad ( 99) Financial Sector Master Plan ( 01) Islamic Financial Services Board (IFSB) ( 02) Malaysian Takaful Association ( 02)
19
FSMP was revealed on 1 March 2001, charts the 10-year course for Islamic banking and Takaful industry in Malaysia.
20
The overall objective is to create an efficient, progressive and comprehensive Islamic financial system that contributes significantly to the effectiveness and efficiency of the Malaysian financial sector while meeting the economic needs of the nation.
21
VISION
To constitute 20% market share within the banking system and insurance industry
Sufficient number of strong and highly capitalised IBIs and takaful operators
22
PROGRESSIVE FINANCIAL INSTITUTION DEVELOPMENT 2003-2010 Issuance of 3 new Islamic bank licenses to foreign IFIs ( 04) Liberation of Islamic Banking & Takaful industry to allow up to 49% foreign interest ( 05) 3 new Islamic Banking subsidiaries commence operation ( 06) 3 new Takaful Operators commence operation
23
1983-1992
Islamic Banking Act 83 Takaful Act 84 Amendment to Central Bank of Malaysia Act 58 to establish Shariah Advisory Council (SAC) at Bank Negara Malaysia (BNM)
24
1993-2002
The Banking & Financial Institution Act 89 was amended to allow Islamic Banking window operation ( 93) SAC formed at BNM ( 97)
25
EFFECTIVE & CONDUCIVE LEGAL & SHARIAH FRAMEWORK 2003-2010 Dedicated High Court ( 03) Tax neutrality policy ( 03) amendment to - Income Tax Act 67 - Real Property Gains Tax Act 76 - Stamp Act 49 Enactment of Malaysian Deposit Insurance Corporation Act 05
26
EFFECTIVE & CONDUCIVE LEGAL & SHARIAH FRAMEWORK 2003-2010 First International Shariah Scholars Dialogue Issuance of Shariah governance framework Establishment of RM200 mil Shariah endowment fund ( 05) First Regional Shariah Scholars forum/dialogue ( 06)
27
EFFECTIVE & CONDUCIVE LEGAL & SHARIAH FRAMEWORK 2003-2010 Amendment to Hire Purchase Act 1967 ( to reflect the operations of Islamic HP activities )
Issuance of 2 standards by IFSB : Capital Adequacy Std and Guiding Principles of Risk Management for Islamic Bank ( 06)
28
DEVELOPMENT OF ADEQUATE POOL OF TALENT & RESOURCES 2003-2010 1983-1992 1993-2002 International Centre for Leadership in Finance (ICLIF) ( 03) International Centre for Education in Islamic Finance (INCEIF) ( 05)
29
To strengthen Malaysia s position as an International financial centre and to realize its target to become Islamic financial hub in this region ..it launched MALAYSIA INTERNATIONAL ISLAMIC FINANCIAL CENTRE (MIFC) on 14 Aug 06
MIFC ? Diversified range of financial institutions operating from anywhere in Malaysia offering Islamic financial products & services in any currency to resident & non-resident 30
MIFC
Under MIFC, Malaysia aims to be : Centre for origination, distribution as well as trading of Islamic treasury and capital market instruments Centre for Islamic fund and wealth management services Centre for international currency Islamic financial services ( including deposit & financing ) Centre for Takaful & Retakaful Centre for Islamic finance education, training , consultancy & research
31
Strong foundation in Islamic finance pioneer in global Islamic banking & finance Strong economic growth & international trade Savvy workforce fluent in English Relatively low cost of living Significant attention & resources directed towards human capital development Strong support by the government Strong international connection/communication currently holds the chair of OIC & IFSB
32
35
MUAMALAH (Man-to-man)
POLITIC ACTIVITIES
ECONOMIC ACTIVITIES
SOCIAL ACTIVITIES
36
Categories of Fiqh
Fiqh Ibadat Fiqh Muamalah Fiqh Munakahad / Usrah Fiqh Jinayat
37
Non-decisive texts Undergo interpretation (ijtihad) according to recognized methodology (usul al fiqh) Legal rulings (hukm fiqhi) Islamic Law
Secondary sources
38
SOURCES OF SHARIAH
The Shariah sources can be divided into TWO namely: Primary sources: - Koran Ijmaa - Sunnah Qiyas Secondary sources: - Maslahah - Istihsan - Istishab
1.
2.
SOURCES OF SHARIAH
1. PRIMARY SOURCES:
AL-KORAN (REVEALATION FROM ALLAH) AL-SUNNAH (THE TRADITIONS OF PROPHET PEACE BE UPON HIM) AL-IJMA (CONSENSUS OF THE OPINION AMONG JURISTS OF ISLAMIC LAW) AL-QIYAS (ANALOGICAL DEDUCTION FROM A PARTICULAR CASE AND OF A KNOWN THING BY REASON IN RESPECT OF THE EFFECTIVE CAUSES OF ITS LAW)
40
41
Maslahah
Maslahah is the consideration which secures a benefit or prevents harm but is, in the meantime, harmonious with the aim and objective of the Shari`ah. Applications:
Issuance of currency Tax imposition
42
SOURCES OF SHARIAH
2. Secondary sources: Istishab is concerning the sense of what was happening in the previous years and go along with the present without any interruption of change. - according to the Shafiis and Hanbalis, Istishab denotes continuation of that which is proven and the abrogation / revocation of that which had not existed. - means it is the presumption in the laws of evidence that a state of affair known to exist in the past continues to exist until the contrary is proved e.g. a presumption of innocence until the guilt is established or marriage is presumed continued until otherwise.
43
Istishab
Istishab may also indicate that facts, or rules of law and reason, whose existence or nonexistence had been proven in the past are presumed to remain so for lack of evidence to establish any change. Applications: A, who is a trading partner to B, claims that he has made no profit, the presumption of absence will be in As favor unless B can prove otherwise.
44
Istishab (contd)
A is known to be indebted to B, A is presumed such until it is proved that he has paid the debt or was acquitted of it. Provided that, Bs loan to A is proven in the first place as a fact. Everything is lawful in mu`amalat unless proven otherwise.
45
SOURCES OF SHARIAH
2.
Secondary sources: Istihsan or Istislah public interest and it is a method of exercising personal opinion in order to avoid any rigidity and unfairness that might result from the literal enforcement of the existing law - it is also described as a juristic preference involving settling aside an established qiyas in favor of an alternative ruling which serves the ideals of justice and public interest in a better way.
46
`Urf
Or it may also mean what is established and practiced by people from their sayings and doings, or not doing". Applications:
Currency exchange rate Standards on banking and finance Wordings in legal documentations Some terms and conditions of contracts
48
Sadd al-dharai`
It implies blocking the means to an evil which is likely to materialize if the means towards it is not blocked. Applications: Prohibition of a creditor from taking a gift from his debtor lest i.e. in order to avoid it becomes a means to usury and the gift a substitute to riba.
49
Supplementary
Supplementary
Tahsinat
Supplementary
Supplementary
Tahsinat
Texts
Texts
Texts
51
52
- deserves reward and its omission entails punishment - wajib: ainii (personal wajib) - kifayah (social wajib)
53
Cont Sunnah (commendable) - deserves reward - its omission not punishable Mubah or Jaiz (permissible) - not rewarded - its omission is also not punishable Makruh (improper) - its omission is rewarded - its commission is not punishable Haram (prohibited or forbidden) - commission is punishable - its omission is rewarded
54
Cont
Schools of Islamic laws: - Hanafi School - Maliki School - Shafii School - Hambali School
55
5.
60
PROHIBITION OF INTEREST
Allah has permitted trade and forbidden usury (Al-Baqarah:275, 276, 278 and 279). That they took usury, though they were forbidden; and their devouring of mens substance wrongfully, we have prepared for the disbelievers among them a painful torment (Al-Nisa: 161). Ar-Rum : verse 39
61
Definition of riba/usury/interest
From Al-Quran: chapter 2 the cow or al-baqarah, verse 275 says those who eat RIBA (usury) will not stand (on the Day of Resurrection) except like the standing of a person beaten by Satan leading him to insanity. That is because they say; Trading is only like Riba (usury), whereas Allah has permitted trading and forbidden Riba (usury). So whosoever receives an admonition from is Lord and stops eating Riba (usury) shall not be punished for the past; his case is for Allah (to judge); but whoever returns (to Riba: usury), such are the dwellers of the Fire they will abide therein.
62
Definition of riba/usury/interest
Ibn Hajar al Asqalani defined riba as excess whether it is in the commodity itself or money. Abu Bakr alArabi held that every excess in return of which no reward is paid is riba. Abu al ala al Mawdudi defined riba as a predetermined excess or surplus over and above the loan received by the creditor conditionally in relation to a specified period. Ataul Haque defined riba an increase or excess which, in an exchange or sale of a commodity, accrues to the owner (lender) without giving in return any equivalent counter or recompense to the other party. In Al-Quran the prohibition of riba was mentioned in four stages before its total prohibition.
63
64
Cont
Riba means increase, addition, expansion or growth. Nienhaus (1986) defines as is a positive predetermined return or guaranteed repayment on capital. Cooper (1981) means to increase to quadruple. Early Christians, St. Augustine defines RIBA as occurring when a person expects to receive anything more than he has given. Greek philosophers such as Plato, Aristotle and Cato agreed that interest was contrary to nature of things and they considered it as as bad as homicide.
65
CONT
Tradition (hadith): It has come from Abu Hurairah, may Allah be pleased with him, that the Prophet said, on the night of elevation, I passed by a people whose stomachs resembled houses full of snakes from which snakes could be seen coming out. I inquired who they were? Jibrail said: These are devourers of usury. (Ahmad & Ibnu Majah) It has come down from Jabir, may Allah be pleased with him, who said, The Messenger of Allah, on whom be peace, cursed the devourer and the witnesses to it, and said: They are in the degree of sin. (Muslim) The Prophet (pbuh) has cursed the receiver and the payer of interest, the one who records it and the two witnesses to the transaction and said They are all alike (in guilt). (Jabir)
66
RIBA (USURY)
BUY/SELL
DEBT/LOAN
RIBA AL-FADHLU
RIBA AL-JAHILIAH
67
A. DEBT USURY
Any extra imposed by the creditor or capital provider onto the debtor for the benefit with regard to the loan given. Debt usury is divided into two: i. Riba Al-Qardhu ii. Riba Al-Jahiliah
68
RIBA AL-QARDHU
Loan given with condition or promise to give extra for the benefit of the creditor. It is HARAM by Shariah (as stated in surah/chapter Al-Baqarah verses 278 & 279). However, if the debtor pays extra on his own accords either in terms of money or in-kind, it is permissible in Islam and it is considered as Qardhu Hasan.
69
70
RIBA AL-JAHILIAH
Any extra payment on top of the principal amount upon expired of the loan. It was popular in the Jahiliah era. E.g. the debtor will say to the creditor, extend the loan period, I will pay extra i.e. interest. Each month the debtor will pay the interest and yet the principal amount remains the same. Haram according to the Shariah (surah AliImram, verse 130).
71
PRODUCTS RIBAWI
Products Ribawi
75
Currencies (As-Sarfu)
Currencies
78
Shariah opinions:
Selling or buying or exchanging currency, generally it needs to follow certain terms and conditions, in order to avoid RIBA activities. Any selling or buying or exchanging needs to be carried out in the ceremony with equal in weight (any forms of money) or else it is RIBA AL_FADHLU (i.e. if not equal in weight) or RIBA AL-NASIAH I.e. if is not done in the same ceremony or Majlis. Shafiie and Hanafi: any exchanging from the two parties, so long they are still at the majlis akad.
79
Shariah opinions:
Maliki: exchanges must happen on the spot or immediately upon Ijab/Qabul. Therefore, any delay by either parties the transaction is void. Exchanges of currencies (make from gold or silver) are not RIBAWI products, therefore, according to Shafiee, Hanafi and Hambali school of thoughts that the delivery on the spot is not the condition. Any exchanges of currency e.g. gold for silver the exchange must happen on the spot. Any exchanges of foreign currency to local ringgit e.g. USD for RM (to the nearest in value), in Islam it is necessary i.e. HARUS.
80
Gharar means risk, hazard, peril and uncertainty in business dealings or undertakes. In business we should not undertake anything blindly without sufficient knowledge Or oneself should not venture into something not knowing exactly what will the outcome.
81
82
MAYSIR
DEFINITION
MAYSIR (GAMBLING)
83
85
It is prohibited for an Islamic bank to give out financing to a company that involves in gambling or any sorts of gambling. Thus Securities Commissions has not listed those companies involved in gambling in Bursa Malaysia because it is against the Shariah.
86
The wisdom of the prohibition of riba i.e. the elimination of injustice and call for cooperation among the capital provider and needing. Accomplishing the fairness and to reduce fraud.
88
Discussion Questions
1. Discuss, does it really matter in an Islamic economy to deal with time value of money (TVM) and appreciation or depreciation of money? 2.How far can Islamic banking go without the help of BNM and what really makes us difference from the conventional banking system? 3.Can we call a conventional bank an Islamic bank if the bank applies some or all the Shariah principles and philosophies in its operations? 4. Are we really Islamic, if we are still relying on the current conventional environments? Discuss.
89