Chapter 2
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CHAPTER 2 THE SHARIAH LAWS AND RULES OF MUAMALAH
Shariah : Perkataan syariah secara bahasanya diambil daripada perkataan syaari, membawa makna jalan atau alur menuju sumber air Secara
khususnya, syariah adalah perundangan dan ketetapan berasaskan Islam yang bersifat dinamik. Ia adalah satu kerangka peraturan perundangan di mana aspek kehidupan umum dan peribadi disusun atur berasaskan prinsip Islam.
Syariah mempunyai hubungan terus dengan semua aspek hidup seharian seperti politik, ekonomi, perniagaan, kekeluargaan, seksual dan isu sosial. Secara umumnya, syariah bukanlah satu susunan kod undang-undang yang statik dan tidak boleh berubah.
Lebih tepat untuk mengatakan bahawa syariah adalah satu sistem membentuk dan menjalani kehidupan seharian yang berperaturan dan menggubal undangundang, berasaskan rujukan asas iaitu alQuran, hadis, ijma dan qiyas.
Ijtihad
ijtihad bererti bersungguh-sungguh, bersusah-payah, menggunakan segenap kemampuan di kalangan ulama, ijtihad ini khusus digunakan dalam pengertian usaha yang sungguh-sungguh dari seorang ahli hukum (fuqoha) untuk mengetahui hukum syari’at.
Imam Al-Ghazali mengatakan bahwa ijtihad adalah usaha sungguhsungguh dari seorang Mujtahid dalam upaya mengetahui atau menetapkan hukum syari’at Ijtihad ialah mencurahkan seluruh kemampuan untuk menetapkan hukum syara’ dengan jalan istinbat (mengeluarkan hukum) dari Kitabullah dan Sunnah Rasul.
The source of Islamic law are from the four sources :
Al-Quran – it consist of command of Allah Hadith and sunnah – it consist of the word or acts of Prophet Muhammad SAW Ijtihad – it consist of interpretation of the four Mujtahid or Imam Ijmak and Qias – it consist of the implied opinion as decided by the
Shariah Rules / Law:
Wajib (obligatory) It is referring to acts, which are rewarded for doing it and be penalised for failing to perform it. Eg : Solat Sunnat (commendable) It is referring to acts, which are rewarded for doing it but not be penalised for failing to perform it. Eg ; Giving the alms
Makruh (Improper but not forbidden) It is referring to improper acts, which are rewarded for not doing it, but not rewarded and not be penalised for doing it. Eg: Taking odoury food Harus (Probable) It is referring acts, which are not rewarded for doing it and also not be penalised for failing to perform it. Eg : eating the ‘prohibited’ food in case you are lost in the jungle
Haram (Forbidden) It is referring act, which are rewarded for not doing it and be penalised for doing it. Eg: involvement in gambling
The shariah principles are given by Allah and remain permanent :
Prohibition of riba
Application of al-bai’ (trade and commerce)
Avoidance of gharar (ambiguities) in contractual agreement
Prohibition of maisir (gambling)
Prohibition from conducting business involving prohibition commodities such as pork, liquor, illicit sex and pornography
BASIC ISLAMIC BANKING FRAMEWORKS
Murabahah (cost plus) a contract for purchase and resale that allows the customer to make purchases without having to take out a loan and pay interest. A bank purchases the goods for the customer, and re-sells them to the customer on a deferred basis, adding an agreed profit margin. The customer then pays the sale price for the goods over instalments, effectively obtaining credit without paying interest.
Bai’ Salam (deferred delivery sale) a purchase contract with deferred delivery of goods(opposite to Murabaha), usually used for commodity finance. It is similar to a forward contract where delivery is in the future in exchange for spot payment.
Istisna (predelivery financing and leasing) an instrument used to finance long-term projects. It is a contractual agreement for manufacturing goods and commodities, allowing cash payment in advance and future delivery or a future payment, and future delivery. Often used for financing the manufacture or construction of houses, plants, projects, and building of bridges, roads, and highways.
Mudarabah (profit/loss sharing) a contract between two parties, one who provides the funds and the other who provides the expertise and who agree to the division of any profits made in advanceThe profit-sharing continues until the loan is repaid.
Musharakah (joint venture) where parties agree to the sharing of profits and losses in the joint business. The profit is distributed among the partners in pre-agreed ratios, while the loss is borne by each partner strictly in proportion to respective capital contributions.
Sukuk (Islamic bond) Fixed-income, interest-bearing bonds are not permissible in Islam so Sukuk are securities that comply with the Islamic law and its investment principles, which prohibit the charging or paying of interest.
Ijarah (leasing) involves a contract where the bank buys and then leases an item perhaps a consumer durable to a customer for a specified rental over a specific period. The duration of the lease, as well as the basis for rental, are set and agreed in advance.
Wadiah (saving with guarantee) involve contract between the owner of good including money and another party including a bank who is entrusted to keep goods including money under his custodian.
Bai’ Bithaman Ajil (deferred payment sale) it is a contract of deferred payment sale between the owner of good and the buyer, whereby the payment for such purchase may either be deferred to a certain later date or be made by instalments basis for a specific duration of time.
Bai’ Al-Tajiri (hire purchase) is a contract of hire purchase between the hirer and hired, whereby the hired benefit on the use of the hirer’s asset for a specified amount and tenor of rental and subsequently the hirer sell his asset to the hired at an agreed price, after considering the total rental amount paid as part of the purchase price.
Bai Al-Daynn’ (debt trading) is provision of financial resources required for production, commerce and services by way of the sale or purchase of trade documents and papers. Only documents evidencing real debts arising from bona fide merchant transaction can be traded.
Qard Hassan ( benevolent loan) is a contract of benevolent loan between the lender and the borrower whereby the lender is willing to lend a specified sum of money for a specific duration of time, stipulating the terms of repayments for the borrowed amount only.
Ar Rahnu (pawn/collateralised borrowing) is a contract of charge or pledge between the chargor and chargee, whereby the earlier party offered his asset as collateral or security to the later party, aimed to convince the earlier of his right on any debt given be made good.
Al Kafalah (guarantee) is a contract of guarantee on debt or performance guarantee between the guarantor and the beneficiary party under the guarantee, whereby the guarantor is accepting the responsibility to settle the debt of the debtor or to compensate any damages if the contractor failed to perform the agreed job that has been undertaken.
Al Hiwalah (Remmitance) is a transfer of fund o debt from the depositor’s or debtor account to the receiver or creditor account where the commission may be charge for such service.
Al Sarf (foreign exchange) refer to buying and selling foreign currencies. Al Ujr (Fee) refer to commission or fee charge for services. Al Hibbah (gift) gift awarded voluntarily in return for a loan given
LEGAL OPINIONS IN ISLAMIC BANKING
In Malaysia, the membership of Shariah panels of Bank Negara Malaysia and the Securities Commission consist of scholars and practitioners who hold fast to the Shafie school of fiqh (mazhab).
They make legal opinions supposedly on Imam Shafie strict principles, but apparently giving green lights to products that conform to conventional tastes. Shariah Comitee must include people who are experienced in making fatwa. Fatwa are made through ijtihad.
Ijtihad requires a great amount of research and thinking. It can only be done when no answers can be found in the Al-Quran, Sunnah and Ijma’. Problem at hand must be critical when performing ijtihad. Normally, the muftis are responsible for making fatwas, since they are officially appointed by the government to produce legal opinions that serve as a basis for solving problems. Muftis therefore must be researched oriented.
Members who do not hold a mufti post must have or hold formal education in the field of Usul Fiqh and Muamalat or Islamic commercial law. It will be a mistake to invite people who may have strong knowledge of, say, Islamic family and criminal law, dakwah, usuludin or the Arabic language but not an expert on Islamic jurisprudence (Usul Fiqh) and Islamic law of transaction (Fiqh Muamalat).
Thus, qualified Shariah people should be given a role in the Shariah Board of Bank Negara and the Securities Commission so that any legal opinion made is based on solid research with comparative fiqh approaches.
Islamic banking practitioners who do not possess the above qualifications should be allowed to participate but only in the capacity of advisors or consultant. Their role is to make Shariah members understand the problem at hand i.e, the economic and financial concepts so that the ijtihad can be exercised with objectivity and accuracy.
According to D.C Macdonald, fatwa is a formal legal opinion given by a mufti or canon lawyer of standing, in answer to a question submitted to him either by a judge or by a private individual. A mufti, says Joseph Schacht, is a specialist on law who can give an authoritative opinion on points of doctrine and his considered legal opinion called fatwa.
For example, in Malaysia one well known fatwa on Islamic transaction (muamalat) was issued in 1974 by the National Fatwa Council (NFC). It involves a ban on conventional life insurance since it said to contain the three prohibitive elements of riba, gharar and maisir.
Fatwa is made to withstand refutations, it (the fatwa) according to Ibn Qaiyyim, cannot be issued unless the person really understand the Al-Quran, its nasikh and mansukh and their rules, ta’wil and the reason on the occasion of revelation (asbab al-nuzul).
Among others, he must understand the Hadiths as deeply as he understand the Al-Quran and know Arabic language and the situation of the society where the fatwa is to be made. A fatwa may change according to time, place, situation, objective for making the fatwa and the type of problem for which the fatwa is invoke.
This means that the committee members of any fatwa council must be well qualified and brave enough to put their arguments and finding public. National Fatwa Council (NFC) was formed during the Conference of Malay Rulers on 1st July, 1969 and serve to coordinate the activities and administrative of Islamic religion in Malaysia.
THE NATIONAL SHARIAH ADVISORY COUNCIL (NSAC)
When the Islamic Banking Act was enacted in 1983, Islamic banks were required to establish a shariah advisory body. Bank were required to appoint at least the shariah consultant to guide them in their operations.
Established in May 1977, the main objectives of NSAC are : To act as the sole authoritative body to advise BNM on Islamic banking and insurance operations To coordinate shariah issue with respect to Islamic banking and finance To analysed and evaluate shariah aspect of new product or scheme and submitted by the banking institution and insurance companies.
It was later noted that there exist difference in opinion among the shariah consultants and advisors on similar issues, which could disrupt the development of a strong Islamic financial system. Therefore Bank Negara Malaysia decide to set up a body as the highest authority in Islamic Banking and insurance – the National Shariah Advisory Council for Islamic banking and Takaful. NSAC council members are appointed by the BNM Board of Directors.
Shariah : Perkataan syariah secara bahasanya diambil daripada perkataan syaari, membawa makna jalan atau alur menuju sumber air Secara
khususnya, syariah adalah perundangan dan ketetapan berasaskan Islam yang bersifat dinamik. Ia adalah satu kerangka peraturan perundangan di mana aspek kehidupan umum dan peribadi disusun atur berasaskan prinsip Islam.
Syariah mempunyai hubungan terus dengan semua aspek hidup seharian seperti politik, ekonomi, perniagaan, kekeluargaan, seksual dan isu sosial. Secara umumnya, syariah bukanlah satu susunan kod undang-undang yang statik dan tidak boleh berubah.
Lebih tepat untuk mengatakan bahawa syariah adalah satu sistem membentuk dan menjalani kehidupan seharian yang berperaturan dan menggubal undangundang, berasaskan rujukan asas iaitu alQuran, hadis, ijma dan qiyas.
Ijtihad
ijtihad bererti bersungguh-sungguh, bersusah-payah, menggunakan segenap kemampuan di kalangan ulama, ijtihad ini khusus digunakan dalam pengertian usaha yang sungguh-sungguh dari seorang ahli hukum (fuqoha) untuk mengetahui hukum syari’at.
Imam Al-Ghazali mengatakan bahwa ijtihad adalah usaha sungguhsungguh dari seorang Mujtahid dalam upaya mengetahui atau menetapkan hukum syari’at Ijtihad ialah mencurahkan seluruh kemampuan untuk menetapkan hukum syara’ dengan jalan istinbat (mengeluarkan hukum) dari Kitabullah dan Sunnah Rasul.
The source of Islamic law are from the four sources :
Al-Quran – it consist of command of Allah Hadith and sunnah – it consist of the word or acts of Prophet Muhammad SAW Ijtihad – it consist of interpretation of the four Mujtahid or Imam Ijmak and Qias – it consist of the implied opinion as decided by the
Shariah Rules / Law:
Wajib (obligatory) It is referring to acts, which are rewarded for doing it and be penalised for failing to perform it. Eg : Solat Sunnat (commendable) It is referring to acts, which are rewarded for doing it but not be penalised for failing to perform it. Eg ; Giving the alms
Makruh (Improper but not forbidden) It is referring to improper acts, which are rewarded for not doing it, but not rewarded and not be penalised for doing it. Eg: Taking odoury food Harus (Probable) It is referring acts, which are not rewarded for doing it and also not be penalised for failing to perform it. Eg : eating the ‘prohibited’ food in case you are lost in the jungle
Haram (Forbidden) It is referring act, which are rewarded for not doing it and be penalised for doing it. Eg: involvement in gambling
The shariah principles are given by Allah and remain permanent :
Prohibition of riba
Application of al-bai’ (trade and commerce)
Avoidance of gharar (ambiguities) in contractual agreement
Prohibition of maisir (gambling)
Prohibition from conducting business involving prohibition commodities such as pork, liquor, illicit sex and pornography
BASIC ISLAMIC BANKING FRAMEWORKS
Murabahah (cost plus) a contract for purchase and resale that allows the customer to make purchases without having to take out a loan and pay interest. A bank purchases the goods for the customer, and re-sells them to the customer on a deferred basis, adding an agreed profit margin. The customer then pays the sale price for the goods over instalments, effectively obtaining credit without paying interest.
Bai’ Salam (deferred delivery sale) a purchase contract with deferred delivery of goods(opposite to Murabaha), usually used for commodity finance. It is similar to a forward contract where delivery is in the future in exchange for spot payment.
Istisna (predelivery financing and leasing) an instrument used to finance long-term projects. It is a contractual agreement for manufacturing goods and commodities, allowing cash payment in advance and future delivery or a future payment, and future delivery. Often used for financing the manufacture or construction of houses, plants, projects, and building of bridges, roads, and highways.
Mudarabah (profit/loss sharing) a contract between two parties, one who provides the funds and the other who provides the expertise and who agree to the division of any profits made in advanceThe profit-sharing continues until the loan is repaid.
Musharakah (joint venture) where parties agree to the sharing of profits and losses in the joint business. The profit is distributed among the partners in pre-agreed ratios, while the loss is borne by each partner strictly in proportion to respective capital contributions.
Sukuk (Islamic bond) Fixed-income, interest-bearing bonds are not permissible in Islam so Sukuk are securities that comply with the Islamic law and its investment principles, which prohibit the charging or paying of interest.
Ijarah (leasing) involves a contract where the bank buys and then leases an item perhaps a consumer durable to a customer for a specified rental over a specific period. The duration of the lease, as well as the basis for rental, are set and agreed in advance.
Wadiah (saving with guarantee) involve contract between the owner of good including money and another party including a bank who is entrusted to keep goods including money under his custodian.
Bai’ Bithaman Ajil (deferred payment sale) it is a contract of deferred payment sale between the owner of good and the buyer, whereby the payment for such purchase may either be deferred to a certain later date or be made by instalments basis for a specific duration of time.
Bai’ Al-Tajiri (hire purchase) is a contract of hire purchase between the hirer and hired, whereby the hired benefit on the use of the hirer’s asset for a specified amount and tenor of rental and subsequently the hirer sell his asset to the hired at an agreed price, after considering the total rental amount paid as part of the purchase price.
Bai Al-Daynn’ (debt trading) is provision of financial resources required for production, commerce and services by way of the sale or purchase of trade documents and papers. Only documents evidencing real debts arising from bona fide merchant transaction can be traded.
Qard Hassan ( benevolent loan) is a contract of benevolent loan between the lender and the borrower whereby the lender is willing to lend a specified sum of money for a specific duration of time, stipulating the terms of repayments for the borrowed amount only.
Ar Rahnu (pawn/collateralised borrowing) is a contract of charge or pledge between the chargor and chargee, whereby the earlier party offered his asset as collateral or security to the later party, aimed to convince the earlier of his right on any debt given be made good.
Al Kafalah (guarantee) is a contract of guarantee on debt or performance guarantee between the guarantor and the beneficiary party under the guarantee, whereby the guarantor is accepting the responsibility to settle the debt of the debtor or to compensate any damages if the contractor failed to perform the agreed job that has been undertaken.
Al Hiwalah (Remmitance) is a transfer of fund o debt from the depositor’s or debtor account to the receiver or creditor account where the commission may be charge for such service.
Al Sarf (foreign exchange) refer to buying and selling foreign currencies. Al Ujr (Fee) refer to commission or fee charge for services. Al Hibbah (gift) gift awarded voluntarily in return for a loan given
LEGAL OPINIONS IN ISLAMIC BANKING
In Malaysia, the membership of Shariah panels of Bank Negara Malaysia and the Securities Commission consist of scholars and practitioners who hold fast to the Shafie school of fiqh (mazhab).
They make legal opinions supposedly on Imam Shafie strict principles, but apparently giving green lights to products that conform to conventional tastes. Shariah Comitee must include people who are experienced in making fatwa. Fatwa are made through ijtihad.
Ijtihad requires a great amount of research and thinking. It can only be done when no answers can be found in the Al-Quran, Sunnah and Ijma’. Problem at hand must be critical when performing ijtihad. Normally, the muftis are responsible for making fatwas, since they are officially appointed by the government to produce legal opinions that serve as a basis for solving problems. Muftis therefore must be researched oriented.
Members who do not hold a mufti post must have or hold formal education in the field of Usul Fiqh and Muamalat or Islamic commercial law. It will be a mistake to invite people who may have strong knowledge of, say, Islamic family and criminal law, dakwah, usuludin or the Arabic language but not an expert on Islamic jurisprudence (Usul Fiqh) and Islamic law of transaction (Fiqh Muamalat).
Thus, qualified Shariah people should be given a role in the Shariah Board of Bank Negara and the Securities Commission so that any legal opinion made is based on solid research with comparative fiqh approaches.
Islamic banking practitioners who do not possess the above qualifications should be allowed to participate but only in the capacity of advisors or consultant. Their role is to make Shariah members understand the problem at hand i.e, the economic and financial concepts so that the ijtihad can be exercised with objectivity and accuracy.
According to D.C Macdonald, fatwa is a formal legal opinion given by a mufti or canon lawyer of standing, in answer to a question submitted to him either by a judge or by a private individual. A mufti, says Joseph Schacht, is a specialist on law who can give an authoritative opinion on points of doctrine and his considered legal opinion called fatwa.
For example, in Malaysia one well known fatwa on Islamic transaction (muamalat) was issued in 1974 by the National Fatwa Council (NFC). It involves a ban on conventional life insurance since it said to contain the three prohibitive elements of riba, gharar and maisir.
Fatwa is made to withstand refutations, it (the fatwa) according to Ibn Qaiyyim, cannot be issued unless the person really understand the Al-Quran, its nasikh and mansukh and their rules, ta’wil and the reason on the occasion of revelation (asbab al-nuzul).
Among others, he must understand the Hadiths as deeply as he understand the Al-Quran and know Arabic language and the situation of the society where the fatwa is to be made. A fatwa may change according to time, place, situation, objective for making the fatwa and the type of problem for which the fatwa is invoke.
This means that the committee members of any fatwa council must be well qualified and brave enough to put their arguments and finding public. National Fatwa Council (NFC) was formed during the Conference of Malay Rulers on 1st July, 1969 and serve to coordinate the activities and administrative of Islamic religion in Malaysia.
THE NATIONAL SHARIAH ADVISORY COUNCIL (NSAC)
When the Islamic Banking Act was enacted in 1983, Islamic banks were required to establish a shariah advisory body. Bank were required to appoint at least the shariah consultant to guide them in their operations.
Established in May 1977, the main objectives of NSAC are : To act as the sole authoritative body to advise BNM on Islamic banking and insurance operations To coordinate shariah issue with respect to Islamic banking and finance To analysed and evaluate shariah aspect of new product or scheme and submitted by the banking institution and insurance companies.
It was later noted that there exist difference in opinion among the shariah consultants and advisors on similar issues, which could disrupt the development of a strong Islamic financial system. Therefore Bank Negara Malaysia decide to set up a body as the highest authority in Islamic Banking and insurance – the National Shariah Advisory Council for Islamic banking and Takaful. NSAC council members are appointed by the BNM Board of Directors.
