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.

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