Digital experience key to Islamic banking
MMJ
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Digital experience key to Islamic banking's relevance, says Bank Islam CEO
MMJ Comment
The architects of the current monetary and banking systems, both domestic and international, frequently characterize risk as a severe liability to ensure that banking institutions remain exclusively engaged in debt-based transactions. While Islamic banking institutions were expected to pursue an alternative trajectory, those operating within the Malaysian framework are often subject to the same regulatory structures as conventional interest-based (Riba) institutions, rather than being governed solely by Shariah principles.
This aversion to risk has compelled Islamic banking to adopt debt financing models while avoiding equity-based approaches. In contrast, Islamic jurisprudence regulates risk through the legal maxim "Al-Ghunm bi Al-Ghurm," which stipulates that profit is only permissible when accompanied by risk. Consequently, no individual is entitled to a reward without assuming the corresponding risk. In the economic model of Madinah, the primary transactions were based on equity principles such as Mudarabah and Musyarakah, with debt transactions being limited to Bai Istisna (deferred payment sales).
For instance, in a scenario where a baker provides goods weekly but receives payment monthly, a minor element of debt financing is present. Additionally, interest-free loans (Qardhul Hasan) may be extended to assist individuals in purchasing essential goods, with borrowers encouraged to provide a voluntary gift (Hibah) to the lender if financially capable. However, debt transactions were historically not intended for commercial business purposes.
Regrettably, Islamic banking has witnessed the questionable extension of debt principles to appease specific regulatory bodies. These principles have been stretched beyond their original intent, maintaining only a superficial adherence to Fiqh parameters while disregarding the Maqasid Shariah (higher objectives of Islamic law). This shift has resulted in the endorsement of transactions that regulators prefer, despite the likelihood that the Prophet Muhammad would have disapproved of them.
Therefore, it is imperative to provide comprehensive (Syumul) education to the populace to alert policymakers to these deviations. Without such education, decision-makers may inadvertently rely on inadequate understanding. Recently, respected scholars have faced charges of financial crimes that are difficult to comprehend. While fraud may not be the sole explanation, it may be necessary to consider a new legal concept addressing "criminal negligence" to account for individuals who are misled into unethical business practices.
Education must remain comprehensive and inclusive. However, independent thought is often discouraged by those in positions of authority and their supporters. Current discourse suggests that certain commentators are venturing into contentious territory by dismissing fundamental requirements of Aqad (contracts), particularly regarding debt transactions. The strict adherence to Aqad protocols previously protected Muslim investors from the subprime crisis. It appears some advocates are calling for a more liberal interpretation of Shariah, exceeding the current excesses. It would be prudent for stakeholders to anticipate significant repercussions in an environment where apologies may no longer be sufficient.
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Dikemaskini [Updated]: Sam Ahmad 20260817