The emergence of Internet had changed our life, either directly or indirectly. This is also true with the corporate and business world nowadays. Companies and organizations no longer regard the Internet only as a tool or reminder to the public to show who they are or what are they doing. Today, Internet has become a very important tool to do business. Among the earliest and important examples of how Internet has changed the ways companies fully utilized the benefits of Internet are Amazon.com, e-Buy and others.
Banking and financial institutions have also realized the true potentials and benefits of the internet. Right now, their websites are no longer just another advertisement to show that they are still alive and kicking, but also offer various type of products and services to the customers. The services are no longer just to show what is the amount of money in the accounts of their customers, but also offers various products and services such as online banking, bill payment, mortgage, loans, insurance and so on. These terms are what we are now calling ‘online financial services’.
Basically, commercial banks performed two functions: money transfer services (including all current account operations) and money lending. In general, the former does not involve any interest. On the other side of the balance sheet, we have two types of deposits: current account (demand) deposits and savings deposits. Here too, the former generally does not involve any interest. Therefore current account operations and money transfer operations are free of riba on both sides of the balance sheet. As such all commercial banks are interest-free banks with respect to these operations.
The problem, then, arises only in respect of savings deposits on the one side and loans on the other, because both incur interest. Thus, the questions of lending and accepting savings deposits, without dealing in interest (riba) arise.
Interest-Free Commercial Banking
A real Muslim does wish to avoid dealing in interest in order to comply with their religious belief, and limits itself to finding a simple, logical and easily executable methodology of achieving this objective. It does not concern itself with providing a justification or philosophy for the prohibition nor with the subtle differences and related discussions regarding the correct definition of riba. It simply accepts the commonly understood meaning of it that, any money demanded or received by the lender in addition to his original capital is riba and proceeds from there. The resulting system, therefore, is practicable irrespective of why one wishes to avoid dealing in interest. For there are also people who are convinced for various reasons that demanding or receiving interest is bad.
The approach adopted is to “first take a closer look at modern banking practices and find out whether and where the prohibited riba (interest) occurred and then to see whether it could be eliminated from the existing practices and then to check if the resulting system was still viable.”
On the deposit side, what the depositor receives in addition to his capital is the interest. This is riba (pure interest) by definition. If a Muslim refuses this interest because it is prohibited by his religion, then this side of the balance sheet is free of riba. On the other side of the balance sheet, we have the “interest” collected by the bank from the borrower. Ideally, the bank uses the funds it receives from depositors to grant loans to clients. But the “interest” it charges the borrowers is more than the interest it pays the depositors. This is because the former should also cover, besides the interest paid to the depositor, the costs the bank incurs in collecting and disbursing the funds as well as in accounting, administration, safekeeping, etc.
A model is constructed where the “interest” charged by the bank is split into several components. Then each of these components is studied to see if it contained the prohibited riba. The idea is that if any one component contained such riba then to see if it could be removed. If some components are free of riba, and others containing riba can be removed, then we have an “interest” which is free of riba. If this can be achieved and if the resulting system is viable, then we have a riba-free system that is also viable. And, since it was originally derived from the conventional model it should also be compatible with it.
This “interest” collected by the bank from the borrower is a cost to the borrower, of obtaining this amount of financing. Therefore, it is named the Cost of Borrowing (CoB) and is considered as consisting of six components: interest (paid to the depositor), services cost, overheads cost, risk premium, profit, and compensation for the value erosion of capital due to inflation. It is shown that only the first component falls under the definition of riba and all others are free of it.
Muslims are prohibited by to deal in interest (riba) in any way. Giving and receiving as well as witnessing are all prohibited. Thus an Islamic banking system cannot pay any interest to its depositors; neither can it demand or receive any interest from the borrowers nor could the banks witness or keep accounts of these transactions. But the lender is entitled to the return of his capital in full. This is a Qur’anic injunction. The proposed system complies with these fundamental Islamic requirements.
A basic tenet of commercial banking is capital guarantee. The capital entrusted to the bank by a depositor must be returned to him in full. The proposed system fully complies with this requirement. Islamic banking as practised today does not provide capital guarantee in all its deposit accounts. In many countries, this is one of the two main objections to permitting the establishment of Islamic banks. There is no objection to paying zero interest on deposits.
Thus, by paying zero interest and guaranteeing capital, the proposed system satisfies both the riba-prohibition rule of Islam and the capital guarantee requirement of conventional banking acts. This enables it to obtain permission to set up and operate as a deposit bank in all countries of the world, while obeying the riba-prohibition rule and qualifying to be an “Islamic” bank. This is of paramount importance to Muslim minorities living in non-Muslim countries. Furthermore, the existence of interest-free banks in all countries will also remove the many difficulties faced today by Islamic banks in transacting international business. Like any other human being, Muslims also need and desire a secure dwelling for themselves and their families. For example, in the past, owning a home was an unthinkable proposition for practicing Muslims, because Islam prohibits usury. The Qur'an (2:276) says: " Allah has permitted trade and forbidden usury," and in 2:278 reminds the Muslims: "O ye who believe, keep your duty to Allah and relinquish what remains (due) from interest, if you are believers."
The Prophet (p.b.u.h) forbade usury. One of the better-known Hadith, narrated by Ibn Mas'ud, quotes the Messenger of Allah (p.b.u.h), saying, "Allah has cursed the receiver, the giver of the interest and also the witness and the scribe of the interest- bearing transaction; they are alike." (Muslim, Tirmidhi).
The concept of interest-free housing finance is still unknown in the West, thus the term "mortgage" is used here in the sense of collateral and as having the title of the property in the names of those who provide the funds. The cooperative housing programs help those Muslims who need financial help to purchase a home, while helping to generate income for the investors from the rent and shares in the appreciation of the property's value.
Practicality:
Islamic investment equity funds market is one of the fastest growing sectors within the Islamic financial system. Currently there are approximately 100 Islamic equity funds worldwide. The total assets managed through these funds currently exceed US$5 billion and is growing by 12-15% per annum. With the continuous interest in the Islamic financial system, there are positive signs that more funds will be launched. Some western majors have just joined the fray or are thinking of launching similar Islamic equity products.
Despite these successes, this market has seen a record of poor marketing as emphasis is on products and not on addressing the needs of investors. Over the last few years, quite a number of funds have closed down. Most of the funds tend to target high net worth individuals and corporate institutions, minimum investments ranging from US$50,000 to as high as US$1,000,000.
Target markets for Islamic funds vary, some cater for their local markets e.g. Malaysia and Gulf based investment funds. Others clearly target the Middle East and Gulf regions, neglecting local markets and have been accused of failing to serve Muslim communities.
Since the launch of Islamic equity funds in the early 90's, we have seen the establishment of credible equity benchmarks by Dow Jones Islamic market index and the FTSE Global Islamic Index Series. The website failaka.com monitors the performance of Islamic equity funds and provide a comprehensive list of the Islamic funds worldwide.
Al-Taslif Credit Card (AmBank Group, formerly known as Arab Malaysian Banking Group):
Based on Shari’ah Principle:
The AmBank Al-Taslif Credit Card has been formulated based on the Shari'ah principle of Bai' Al Inah (Buy back sale), which govern installment payments over a fixed period. One can use the Al-Taslif Credit Card with the assurance that it has been tailored with one's spending needs in mind, and without compromising Islamic values.
Low Banking Cost of 15% p.a.:
Customer will only be charged a low banking cost of 1.25% per month or 15% per annum on our outstanding balance. What's more, if we decide to settle only the minimum amount each month, customers will not be subjected to additional banking cost. It's free of Interest!
Annual Fee Waiver & Charity:
With AmBonus, there is more than providing customers with savings on card annual fees! It also allows customers to do a bit for charity. For every RM100 spend on retail transactions, we will receive AmBonus worth RM1 which can be set off against the annual card fees. What's more, the excess will be donated on our behalf to charitable organizations.
More Cash Rebates For Our Loyalty:
With AmTransfer, one can use up to our available card limit to consolidate customers' outstanding balances from our other credit or charge cards at 15% p.a. until full settlements.
AmProtector:
For only RM0.03 on every RM 100 outstanding balance, we and our family will enjoy peace of mind as our outstanding balances are covered up to maximum of RM50, 000 in the event of any mishap.
Instance Acceptance and Cash Worldwide:
The card is welcomed at more than 22 million establishments worldwide. However, in keeping with Shari’ah principle, card members are advised not to use the card in establishments that contradicts Islamic values e.g. casino, massage parlors, dating and escort services, bars etc. We'll also have instant access to more than 600,000 MasterCard/CIRRUS and VISA/PLUS ATMs or affiliated banks and financial institutions worldwide.
Automatic Travel Accident Plan Charge:
Travel tickets to our Gold card and we will enjoy automatic free travel accident insurance of up to RM500, 000. We will also enjoy additional coverage for travel inconveniences.
AmDirect Phone Banking and Online Banking Service:
One may easily access the card account anytime for a host of financial services and enquiries. We can simply enjoy your personal banking service by calling AmDirect Call Center at 03-2612 6888 or login to http://www.ambg.com.my.
No Joining Fees:
No fee is required for securing a Card (membership) of AmBank.
Zakat payment:
For the convenience, AmBank has made provision for Al-Taslif card members to make our zakat (tithe) payments directly through the card. This facility is currently available with Pusat Pungutan Zakat Wilayah Persekutuan.
0% Interest Easy Payment Plan:
With interest-free installment payment, we can select from a range of products and services from AmBank’s partnering establishment.
MasterCard Global Service:
Provides emergency 24-hour travel assistant service and worldwide emergency assistant for lost and stolen reporting, emergency card replacement, emergency cash advance, ATM network location information, and issuer directory assistance.
MasterAssist Travel Assistant Service for Gold card members:
Provides 24-hour travel assistance service and worldwide emergency assistance, pre-trip information, traveling assistance, legal referrals and bail bond assistance.
VISA 24-hour Global Customer Assitance Service(GCAS):
Provides medical referrals, monitoring, assistance and follow-up, transportation assistance, legal assistance, pre-trip assistance, interpreter assistance as well as lost/valuable document delivery.
Flexible Payment Options:
We have a worldwide choice of payment method on how we want to make our monthly card payment, either in full or the minimum repayment of 5% or RM50 whichever is higher.
ATM Services:
AmBank’s Extensive AmBank Group ATM network and CIRRUS/PLUS ATM, which covers a wide range of automated services allows us access our card account 24 hours a day.
Recommendations:
Because the online financial service is still a new phenomenon worldwide, it does have benefits to everyone. But if we take the Shari’ah principles into consideration, some extra works must be done in order to make sure that it is accordance with Islamic principles as mentioned before. Just for a note, usually, Shari’ah based online financial system is still based on ‘off-line’ financial services provided by financial institutions, only now, instead of physical building, there will be a cyberspace!
First, financial institutions must provide a clear picture to the customers of how does the shari’ah based online financial services works. It is not only shown some figures but also explanation like which company that they are going to invest, what principles that they take, how does the profit is distributed and so on. If possible, they should also provide the list of the companies that they are invested and also the member of the Shari’ah panel board in their financial institutions. It will make customers feel secure because they know that their deposits is legally invested and supervised by Islamic scholars.
Then, for the customers, they should put aside the stigma in their mind that just because some financial institutions’ name is not sound like Islam, they do not follow accordingly with Islamic rules and regulations. For instance, there are an interview with Malay/Muslim customers on why don’t they invest in one financial institution, which they reply that that financial institution is not sound like Islam at all! This perception must be discarded from our mind to ensure that Shari’ah based financial system will be better accepted worldwide.
No comments:
Post a Comment