Thursday, 30 September 2010

Siwak or toothbrush (gold or fiat money)?

Bismillahirohmaneerohim (In the name of Allah, the Most Merciful, the Most Compassionate)

I have given up on the toothbrush for more than a year now. I've got to say, using the siwak makes it feels really clean. Once I had gingivities even when I brushed my teeth every day using the toothbrush. Now that I've used the Siwak, I've never had such problem and the plaques in between my teeth are not as hard as it used to be. It is much easier to remove the plaques now.

The Siwak, as we know was used by the Prophet salallahualaihiwassalam in his lifetime. Abu Hurayra reported that the Messenger of Allah salallahualaihiwassalam, may Allah bless him and grant him peace, said, "If it was not for the fact that I might have been overburdening my community - or the people - I would have ordered them to use the siwak for every prayer."

Therefore from this, the use of the siwak is a strong suggestion for the community by the Prophet salallahualaihiwassalam. But it wasn't enforced to be as the toothbrush or to use the siwak for every prayer. The community have the option to use the siwak or to use the toothbrush. It is not stated in the Qur'an that a Muslim must use the siwak. But I have prefered to use the siwak anyway.

In my opinion, it is the same with gold and fiat money (paper money). Based on my research the Prophet salallahualaihiwasalam had never used his authority to state that gold is the money for Islam. He did not mint gold or declared it as the only money for Islam. I have not come across any Hadith which is even close to the Hadith of the siwak that I quoted above that strongly suggest it(gold) to be used. In fact there was a hadith that was mentioned by my lecturer that states the most miserable servant, is the servant of dirham/dinar (please do not take my word for granted as it is better for one to research).

"Gold is to be paid for by gold, silver by silver, wheat by wheat, barley by barley, dates by dates, and salt by salt - like for like, equal for equal, payment being made on the spot. If the species differ, sell as you wish provided that payment is made on the spot" (Hadith Muslim)

Paper money used to be a debt of real wealth of gold and silver, and this would not be allowed because of the prohibition from one of the Prophet’s Hadith about any transactions in gold, silver, wheat, barley, rice and dates is to be done on the spot and hand to hand. If the paper money represents gold, therefore this transaction goes against the hadith as the gold is not being transferred from one person to another.

But paper money now do not base its value on gold or silver, so it doesn't contradict with the hadith and seems like it will be permissible to use it as money. There are some that states that money should have intrinsic value because of the Hadith that has been stated above. The rationale to that statement was, all of the six items have value and can be used as money. In my research, I've not encountered that wheat, barley or dates was used as money (please advise me if I'm wrong on this). These items are perishable (may be eaten, rotten and etc) so it is rarely used as money. So, is it necessary for money needs to have intrinsic value? Who puts the value towards gold? If gold does not interest anyone, wouldn't the value of gold go down/depreciate? So it depends on the demand of the community to put the value on gold. What is the difference with fiat money? Fiat money too also depends on the demand.

I've not worked in an Islamic bank and I don't think I am biased towards Islamic banking. Some have gone to say that Islamic banking is a great deception and stuff like that. Although I do see some Islamic banks are not conducted properly, I don't think that it is a "great deception". Islamic banks needs to be improved with the help of the community.

The argument of gold as the ULTIMATE ISLAMIC MONEY, is not really accurate. Big transactions using gold will require delay payments and as the Hadith on gold earlier states that "sell as you wish provided that payment is made on the spot". I see this as a problem in using gold. If this problem and other problems on gold are being solved then there is nothing wrong on the usage of gold. I do not oppose gold nor do I support fiat money. Both have problems and in my opinion both may be used as money as long as it is being used properly.

Wednesday, 29 September 2010

Another argument on Islamic banks

Islamic Banks and other Islamic financial institutions are today lending money on interest through the back-door by disguising a loan as a sale on credit. They call it murabaha! But it is most certainly not murabaha! It is Riba! What the bank does is to offer an item on sale in a credit transaction with a price substantially higher than the cash price. While credit transactions are Halal, since the blessed Prophet (sallalahu ‘alaihi wa sallam) himself engaged in such transactions, there is no evidence that the credit price in such transactions was ever higher than the cash price. When credit price is higher than cash price then the implication would be that time has value. And the essence of Riba is that money grows over time. When a client wishes to purchase something, but does not possess the cash with which to purchase it, the so-called Islamic bank enters into the fiction of purchasing the item at its cash price and then selling it to the client on credit. The interest charges are added to the selling price thus making a credit price for the item substantially higher than the cash price." (This is taken from another website which criticises Islamic banking)

Generally the author is trying to emphasise that Islamic banks uses (time=money) in deferred payments. This is actually not the case (theoratically). If the price has been agreed between the client and the Islamic banks the price has to be settled even if the client wants to finish it earlier. For example a car is £5000, and it is being sold by the bank to the individual for £7000 after 3 years. I've explained earlier in my previous entry that it is not wrong in Islam to gain profit. The author admits that credit transactions are halal. So the problem here is that when time effects the final price of the product.

An individual who bought the car for £7000 in 3 years wishes to finish the payment in 2 years instead. Usually with conventional banking that individual will get a discount for finishing his/her payment earlier than the agreements. To simplify it, the individual has to pay £6000 if he/she finishes his/her payments in 2 years. In Islamic banking however, this is not the case. Even if a person wishes to finish the payments earlier, it will still be £7000 because if the bank gives discount than, the Islamic banks does involve the final price of the product (time=money). Therefore if it is still £7000, time does not have any effect on the final product (which means time does not = money). But I happened to know a few "Islamic banks" in Malaysia which gives discount. It has been a while since I've interacted with any Islamic banks so I'm not sure if they have changed their conduct. The Islamic banks in Malaysia are too worried of competition with the conventional banks therefore they have made it permissible to give this discount. As I've said before it is up to us, the users of Islamic banks to make sure that the Islamic banks are actually conducting Islamically.

Monday, 27 September 2010

In reference to "Why is Islamic home financing haram?" part 2

Bismillahirohmaneerohim (In the name of Allah, the Most Merciful, the Most Compassionate)

In my last entry I've written about the profit that Islamic bank deserves when conducting business (buying and selling) and not deriving profit from interests. The next question that a person would generally ask is, how much does a bank deserve to earn as profit? Ustaz Zaharuddin has written on this here. Basically he explains that there is no prohibition on the amount for profit. It is the choice of the individual (or banks) to charge any amount for profit. In my opinion, a person who follows the values of Islam would however not take advantage to the extreme.

There are arguments about the validity of Islamic banking. I have made it clear that it is alright to do business (buying and selling) as long as it doesn’t involve riba/interest. So can a bank do business? Some argues that doing business is alright but Islamic banking is wrong? What is their explanation? They say that the banks are enslaving the community.

Theoretically, if an individual could not manage to pay their monthly fees, Islamic banks don’t have the right to ask for it. From what I understand in Malaysia is that, to avoid the public from taking this advantage they will charge a ‘late payment fee’. This ‘late payment fee’ will and should be going to a charity and cannot be accepted/taken by the bank. However, I cannot be certain of the conduct of the Islamic banks on this. Another thing that needs to be highlighted is that with conventional banks, if an individual misses some monthly payments, the interests will accumulate. I have highlighted in my previous blog that how injustice interests can accumulate to. With Islamic banks however, even if a person needs to pay late payment fees, the original agreed payment does not add up. The Islamic banks can only claim what is agreed on the price on the agreement and they will use a verse 91 from the Qur’an surah Nahl : “And fulfil the covenant which you have made with Allah and do not break your oaths after having firmly made them, and after having made Allah your witness. Surely Allah knows all that you do” in their defense.

In the context of housing construction, if it was abandoned, in my opinion the bank has to bear responsibility of loss and the individual too has to bear the responsibility of the loss. However, this is just an opinion and not the reality conduct of the Islamic banks. In the UK there is a financial package to buy a car which I find pretty much Islamic. Even so, they do not include the term Islamic in the financial package. The financial package is renting a peugeot with the option to buy at the end of the contract. For example, an individual pays rent for the car for 2 years, and after that 2 years the individual has the option to buy the car for a certain amount. If the individual decides not to buy, the car will be taken back into the banks possession. During the renting period, all the maintenance like M.O.T (a car checkup in order to get the road tax), the road tax, insurance, and mileage car service are all covered by the owner (bank) and not the individual. The individual only has to pay the monthly rent and car fuel. There are no interests involved, the owner (bank) bears responsibility for the car.

In my opinion the problem is with the Islamic banks in Malaysia and not Islamic banks in general. Malaysia has gone the extra mile in their Islamic banks just to compete with conventional banks and therefore have caused their financial products to be similar as the conventional products. In my understanding, Malaysia has produced financial products such as Bay al dayn, BBA, and Tawarruq which are ‘controversial’. The reason of me saying it is controversial because I do not have the authority to say it is halal or haram. So I would rather say controversial. These products however have been apposed by other countries such as Saudi Arabia and etc. Most of Malaysia’s Islamic banks are actually Islamic windows provide by the conventional. For example HSBC is a conventional banking which provides Islamic windows (HSBC amanah). There are only two full fledged Islamic banks which are BIMB and BBMB which originates from Malaysia. Malaysia are claiming they should be the leading/hub for Islamic banks? I doubt it. Therefore we as the community should push for a better Islamic banks and avoid the misconducts of the Islamic banks. We should not let the Islamic banks take advantage of us.

My conclusion is that we should not boycott Islamic bank or say that Islamic banks are haram, but we should always use our power as the customer/client to push and demand for a better Islamic banking. Then, some will argue, the fiat money or the paper money has no intrinsic value? This is not the money that Islam “recognises”, and how then can the community uses Islamic banks? I will continue on money and Islam in my next entry insha’allah.

Sunday, 26 September 2010

In reference to "Why is Islamic home financing haram?" part 1

Bismillahirohmaneerohim (In the name of Allah, the Most Merciful, the Most Compassionate)

I would like to express a little of the knowledge that I have with me about Islamic banking. I've been getting a lot of questions about the validity of Islamic banking as this is the main concern of the public. Conducting business is an ibadah, so we should always make an effort to do it in the right way. Therefore we have to expand our knowledge. By me saying expand, I don't mean just to refer to a person/scholar, but gain information on many different angle from different people especially from the knowledgeable ones. After doing this, one should know what is best for oneself. Lately, some friends of mine are being slightly influenced by this Sheikh who condemns about Islamic banking. The Sheikh is entitled to his opinion as far as I'm concerned. I'm no where near the status of a Sheikh but I too have an opinion.

Naturally, I was also sceptic about Islamic banking as I've read some books on Islamic banking and because of being raised in Malaysia, my perception on Islamic banking was more towards negativity. This is one of the reason why I took the course of Islamic banking, and also not taking the course in Malaysia. During my course I was ever being sceptic and after completing the course, I've got my own conclusion.

Firstly, the main concern of Islamic banking is because the Qur'an prescribed us in Surah al-Baqarah verse 275
" Those who devour interest, they behave as the one Satan has confounded with his touch seized in the state they say: "Buying and selling is but a kind of interest," even though Allah has made buying and selling lawful and interest unlawful. Hence he who recieves this admonition from his Lord, and then gives up (dealing in interest). may keep his previous gains, and it will be for Allah to judge him. As for those who revert to it, they are the people of Fire and in it shall they abide."

The verse have clearly states that buying and selling is permissible but  interests are prohibited. If one were to make a business (buying and selling) without charging interest, is it permissible? Based on this verse, my opinion is that as long as we avoid interest, it is permissible. Now what seems to be the problem?

My friends who asked me about Islamic banking are from Malaysia, so I'm going to base this discussion on the situation in Malaysia. Firstly in Malaysia, their view towards banks as a place to do loans. This is because of the conduct of conventional banks and we as the public have digested this idea where a bank is a place to do a loan. Because of Islamic banking are relatively new compared to the conventional banking, most of us do not have a clue what Islamic banking is all about. So usually the public will then assume. The Islamic bank is not necessarily a place for loan. It is a place to do business. If the Islamic provides loan, it will be Qardh hassan where no interest will be charged. But most of the Islamic banks don't do this because it is not "productive" as they are a place for business. The reason I put the inverted commas on productive is because my opinion differs as I do see Qardh hassan as productive.

So, a conventional bank is a place where they provide an individual with the money, and expects repayment of the loan bit by bit including interest (which is based on time=money). The conventional is not responsible for anything else except collecting the money back from an individual.

Islamic banks are different. If an individual wants to buy something, the bank will buy it from the supplier and sell it to the individual in deffered payments (there is a hadith on buying in deffered payment, it is best for a person to research). What is the different? Firstly, the bank is doing a business (buying and selling) as what was told permissible in the Qur'an. Secondly, when a bank buys something, it is in the responsible of the bank to take care of it (maintenance). This is one of the reason of banks entitlement to earn profit.

Why do the public still are very sceptic towards Islamic banking? There might be two reason for this. Firstly, some Islamic banks might have used the word "pinjaman" (borrowing/loaning) which certainly contradicts buying or selling. The other thing is that the public have 'psychoed' themselves to think that a bank is a place for loan no matter if its Islamic banking or conventional banking. Because of this, I have to point to the Islamic banks for not educating the ummah or the public. But banks are not to be blamed alone, education should come from anywhere, like schools, public functions and etc.

This entry has gone a bit long, for those who are interested, I'll continue in my next entry. Want to read more on the consequences of interests and how it accumulates click here. I have highlighted in the last part of that entry about the amount of interest and how injustice to use interests in loans.

Friday, 24 September 2010



Alhamdulillah I've completed and submitted my dissertation yesterday. I've tried my best to do a good final product of my dissertation and now it is up to Allah and the examiners to give what is appropriate for my work. It has been a while since I last blogged and insha'Allah I'll continue again expressing my opinions. I've got plenty in my mind insha'Allah, but for now I need some time to relax and I'll be back. Wassalam