Time for Malaysia to lead Islamic social finance endeavours
According to the State of the Islamic Economy Report 2018/19, Malaysia has been the leader of the Islamic economy ecosystem for five consecutive years since 2013.
Thomson Reuters ranked Malaysia as the most developed Islamic finance market in the world based on Islamic Finance Development Indicator (IFDI) values.
According to the Malaysia International Islamic Financial Centre (MIFC), Malaysia continues to be the main driver for the sukuk market, representing 48.8 per cent of the total global outstanding sukuk; and 35.8 per cent of the total global Islamic funds assets under management (AuM) as of Sept 2019
Malaysia ranked first with a total of 430 global funds, followed by Saudi Arabia (203), Luxembourg (202), and Pakistan (180).
In 2017, for the Islamic banking sector, Thomson Reuters ranked Malaysia third after Iran and Saudi Arabia.
Malaysia’s rank was similar in the takaful sector for that year, but with Saudi Arabia as the leader, followed by Iran.
Based on the same ranking system, Malaysia took the lead in other Islamic finance sectors, such as financing, real estate and financial technology (or fintech).
It is pertinent to mention that myriad Islamic fintech companies, especially Islamic crowdfunding platforms, have taken various progressive steps towards invigorating Islamic social finance (ISF) instruments.
In addition to Malaysia’s impressive performance as the front-runner in the commercial sector of Islamic finance in the past four decades, perhaps it is time for the country to gear itself up to also lead the revitalisation of Islamic social finance instruments.
Islamic social finance instruments could play a vital role in reducing poverty and addressing challenging socio-economic problems such as education, unemployment, malnutrition and health issues.
Traditionally, Islamic social finance instruments would either be philanthropic, such as zakat (obligatory alms-giving), sadaqah (voluntary alms-giving/charity) and waqf (endowment), or based on ta’awun (cooperation) which includes qard (benevolent loan) and kafala (guarantee).
In modern times, Islamic social finance may also cover modern forms of Islamic financial services such as Islamic microfinance, sukuk and takaful.
Currently, qard and kafala are largely utilised in microfinance exercises as well as banking products and services.
At the same time, taa’wun-based concepts are largely employed in takaful products and services.
Additionally, in many jurisdictions, waqf has become a popular subject of interest in relation to Islamic banking and finance, takaful, sukuk and crowdfunding.
In Malaysia, the utilisation of philanthropic Islamic social finance instruments such as zakat and waqf seems to be restricted because of regulatory hurdles.
This is due to the fact that both zakah and waqf fall explicitly within the exclusive jurisdiction of the states.
For this reason, some Islamic financial institutions have collaborated with respective Islamic Religious Councils (IRCs) of the states when deploying zakat and waqf as part of their financial products or transactions.
However, this collaboration could only happen provided that the states give their consent.
Should they choose to close the door for any cooperation, the respective states could not be blamed, for they have legitimate legal grounds to do so.
Therefore, the sphere of applications for zakah and waqf remains limited.
The concept of sadaqah, on the other hand, seems to be underutilised in many countries including Malaysia.
The term ‘sadaqah’ has been used interchangeably by the Muslim community with the term ‘zakah’.
Generally, based on Quranic injunctions in the Holy Quran and several traditions of Prophet Muhammad (PBUH), the term could refer to both ‘zakah’ (obligatory charity) and charity.
The term is also used in the context of ‘sadaqah jariah’ (continuous charity).
To incorporate the concept of sadaqah as an Islamic social finance instrument, it is prudent to consider its viability from the legal perspective.
In Malaysia, sadaqah seems to fall under the category of charities concerning Muslims provided in State List of the Ninth Schedule of the Malaysian Constitution which gives power to the states to regulate the matter.
General charities, on the other hand, are governed by the federal government as mandated in Item 15 of the Federal List of the same schedule.
Since the states shall only have power over Muslims, any sadaqah/charity based product or service involving both Muslims and non-Muslims may be placed under the care of the federal government riding on the meaning of general charities provided in the Federal List concerned.
Due to this legal position, there is a huge potential of sadaqah to be utilised as an Islamic social finance instrument.
A product called Sadaqa House, initiated by Bank Islam Malaysia Berhad (BIMB), is an example of its application.
A crowdfunding platform, Globalsadaqah.com, has also utilised sadaqah as its underlying contract for its social endeavours.
Both initiatives intermediate the collection of sadaqah or endowment from the public regardless of race and religion.
In April, the United Nation High Commissioner for Refugees (UNHCR) initiated a fund collection initiative based on sadaqah jariyah for refugees with the launch of the Refugees Zakat Fund.
Therefore, social projects concerning poverty reduction and elimination, refugee protection, children’s education and security and many more may consider utilising sadaqah as their underlying contract.
An ongoing children’s protection and security project spearheaded by Unicef is also considering the sadaqah concept.
Islamic social finance has a huge potential to enhance the Islamic economy eco-system for social benefits.
Steps must be taken to cushion the regulatory issues related to the application of Islamic social finance instruments in Malaysia.
In this regard, a smart partnership between key stakeholders such as the federal government, IRCs, non-governmental organisations (NGOs), Islamic financial institutions, fund managers and private companies is crucial.
It is time for Malaysia to take up leadership in this sector as the country has accomplished much in Islamic banking and finance.
The author is a research fellow at the International Institute of Advanced Islamic Studies (IAIS) Malaysia.
Published in: New Straits Times, Saturday 30 November 2019
Source : https://www.nst.com.my/opinion/columnists/2019/11/543461/time-malaysia-lead-islamic-social-finance-endeavours
Female circumcision and human rights
Female circumcision (khitan) is practised widely among Muslims based on the assertion of its obligatory status by many clerics/jurists in certain jurisdictions.
Malaysia is no exception. Malaysia has implemented it due mainly to the national fatwa (religious edict) issued by the National Fatwa Council on April 21-23, 2009.
The council decided that female circumcision is obligatory except in cases where it becomes harmful to the subject.
It should be noted that any fatwa issued by the National Fatwa Council becomes binding only when it is adopted and gazetted by the states as part of their laws relating to the administration of Islamic law.
This is because the National Fatwa Council is a mere coordinating body for the administration of fatwa in Malaysia.
Constitutionally, Islamic laws concerning Muslims are matters under the states’ power. Each state is free to administer its own Islamic law the way it thinks fit.
In relation to the female khitan in Malaysia thus far, states have issued different views or fatwa.
The Fatwa Committee of the Islamic Religious Council of Perlis for instance, decided on April 18 and 19, 2017 that the hukum (ruling) for female khitan varies from one person to another depending on the conditions of their genitals as advised by medical experts.
The committee held that should a female Muslim find herself in need of khitan upon the advice of an expert, khitan in her circumstance attains the status of makrumah (respected) based on the hadith of Ummu‘Atiyyah. Otherwise, khitan should not be performed.
The committee emphasised that the khitan procedure that is carried out rampantly on female Muslims babies in the country without consulting experts is baseless in the eyes of syariah.
The Johor Fatwa Committee on the other hand, is of the view that the procedure is permissible provided it is carried out by a trained and/or certified medical practitioner, as decided in its meeting on June 14, 2012.
Generally, all the above-mentioned fatwa do not differentiate between the khitan procedure practised on the female Muslim adult and the female minor.
Hence it is inferred that they serve as a blanket edict to be followed by all. Malaysian Muslims have basically practised it based on culture and religion.
A seminal study released in 2011 entitled, ‘The Status of Female Circumcision in Malaysia’, revealed that over 90 per cent of Malay Muslim women and their daughters had been circumcised.
The majority were infants between newborn and preschool age.
The study also found that the practice was associated with Islam and Malay ethnicity where the women largely cited religious obligation (80.4 per cent), hygiene (41.3 per cent), and culture (31.9 per cent) as the justifications.
This study was commissioned by the Health Ministry, World Health Organisation (WHO) and United Nations Fund for Population Activities.
According to WHO, female genital mutilation (FGM) comprises all procedures that involve partial or total removal of the external female genitalia, or other injury to the female genital organs for non-medical reasons.
It is classified into four major types. The first three types begin from the least invasive and move on to type two and type three, and their sub-categories, which become increasingly more invasive. We need not, perhaps, go into the more technical aspects of these procedures, which the interested reader can in any case access on the Internet.
The last of the four types includes all other harmful procedures to the female genitalia for non-medical purposes, such as pricking, piercing, incising, scraping and cauterising the genital area.
According to WHO, there are more than 200 million girls and women alive today who have been circumcised or mutilated in 30 countries in Africa, the Middle East and Asia where FGM is largely performed.
It calls for the total banning of FGM on the premise that it is regarded as a violation of the human rights of girls and women since the procedure is harmful and does not carry any proven health benefits to them.
According to Dr Zakiah Mohd Said, female khitan as practised in Malaysia was classified under Type IV in 2008 but reclassified 10 years later under Type 1(a) after a presentation to the CEDAW Committee in 2018.
Professor Harlina Halizah Siraj asserted that since there is no medical benefit proven to merit a continuance of the practice among Muslims, hence it should be banned unless there is a necessity in certain isolated cases as advised by medical experts.
Both expressed their views at a closed roundtable discussion on “Isu Khitan Wanita Di Malaysia: Biar Wanita Berbicara”, organised by Pertubuhan IKRAM Malaysia on Feb 27.
A similar call to denounce and discourage the practice was made by Professor Mohammad Hashim Kamali, a renowned syariah scholar, in an article in the New Straits Times on Dec 14, 2018.
Thus, it is timely for the National Fatwa Committee to revisit its fatwa on female khitan since there is no injunction on its obligatory status in the Quran or sunnah.
This issue merits further study and the formulation of a cogent syariah-based policy that may hopefully stand harmoniously with human rights principles.
The author is a research fellow at the International Institute of Advanced Islamic Studies (IAIS) Malaysia
Published in: New Straits Times, Thursday 8 August 2019
Source : https://www.nst.com.my/opinion/columnists/2019/08/510963/female-circumcision-and-human-rights
Malaysia a global leader in Islamic banking
Malaysia’s pioneering role in the development of Islamic banking and finance has gained worldwide recognition.
The public’s demand to have an Islamic commercial bank offering Islamic banking products and services continued until a commercial Islamic bank was set up in 1983, licensed as Bank Islam Malaysia Bhd (BIMB) under the Islamic Banking Act (IBA) 1983.
To allow BIMB to stabilise its standing in the banking environment, Bank Negara Malaysia (BNM) granted it a 10-year exclusivity to operate as the sole Islamic bank in the country.
In the same year, Government Investment Certificates were issued under the Government Funding Act 1983 to support liquidity management in BIMB’s operation.
A year later, the first Islamic insurance company was established under the name Syarikat Takaful Malaysia Bhd and regulated by the Takaful Act 1984.
In 1990, another historic development was that Malaysia became the first country to issue sukuk (Islamic bonds) with a modest issue size of RM125 million by Shell MDS Sdn Bhd.
As the 10-year exclusivity granted to BIMB expired in 1993, BNM offered the first three licences in an interest-free scheme, namely Skim Perbankan Tanpa Faedah (SPTF) to Maybank, UMBC and Bank Bumiputra Malaysia Bhd.
This scheme allowed the conventional banks to open Islamic banking windows, and the number of banks participating in SPTF grew tremendously.
When the number of players increased, liquidity management became the main hurdle.
To solve this issue, the Islamic Interbank Money Market was launched in 1994 by the Malay-sian government, the first of its kind in the world.
The main problems that faced the SPTF banking scheme were fund management and regulatory issues, since the conventional banks were governed under the Banking and Financial Institutions Act 1989 while full fledged Islamic banks were under the IBA 1983.
Consequently, starting from 2005, Bank Negara called upon the conventional banks to open Islamic windows as their Islamic subsidiaries, licensed under the IBA 1983.
Since then, almost all local banks set up their own Islamic subsidiaries except for a few international banks such as Citibank and United Overseas Bank.
In the same year, the central bank also issued licences to international Islamic banking institutions to compete with local Islamic financial institutions (IFIs).
The first bank having such a licence was Kuwait Finance House followed by Al-Rajhi Bank.
To create a holistic ecosystem for Islamic banking and finance in the country, the regulator also set up a few entities to cater for research and human capital development.
These include the International Centre for Education in Islamic Finance that was set up in 2005, the Islamic Banking and Finance Institute Malaysia in 2007, the International Shariah Research Academy and the Asian Institute of Finance in 2008.
Malaysia also hosted the Islamic Financial Services Board in 2002 to develop the Islamic finance agenda.
Another initiative was the introduction of Syariah Governance Framework in 2011 aimed at strengthening syariah supervision in the system in mainly four areas which are syariah advisory, syariah review, syariah audit, and syariah research.
This paved the way, in turn, for a more extensive revamp of Islamic banking institutions under the Islamic Financial Services Act (IFSA) 2013.
IFSA was designed to create a better governance structure and parallel playing field for both Islamic and conventional banking in the country.
In this journey, hiccups that arose along the growth path of Islamic banking and finance (IBF) were also addressed by remedial measures.
Indeed, even before the enactment of IFSA 2013, many amendments were made to existing laws and regulations to accommodate the needs of IBF operations in the country.
In 2017, Malaysia marked another milestone through the introduction of the strategic intermediation concept, namely Value-Based Intermediation (VBI).
According to BMM, statistics on the development of IBF in Malaysia showed unparalleled growth in the Islamic banking market share and its annual growth rate.
Islamic financial institutions are thus urged to explore new strategies to maintain growth and sustainability through active participation in the VBI agenda.
VBI requires the IFIs to develop innovative Islamic financial products and services that contribute to social well being, the environment and the economy since VBI focuses on the 3Ps, namely people, planet and profit.
Under this concept, the performance of IFIs as intermediaries in the financial system operation will be assessed not only from their financial performances but also non-financial aspects such as engagement and impact on the three areas just mentioned.
The Sadaqa House product that was launched by Bank Islam in January 2018 is a good example of this approach.
This concept actually reflects the higher goals (maqsad) of the Islamic economic system, which is social justice.
IAIS Malaysia played a key role in this initiative.
Malaysia has evidently succeeded in positioning itself a world leader in IBF, thanks to the active participation and support of the government and BNM.
Yet the journey is not over. Our next instalment looks at some of the IFIs products that have come under criticism.
The author is a research fellow at the International Institute of Advanced Islamic Studies (IAIS) Malaysia.
Published in: New Straits Times, Thursday 7 February 2019
Source : https://www.nst.com.my/opinion/columnists/2019/02/458228/malaysia-global-leader-islamic-banking
Difference between Halal and Halalan-Toyyiban
Halal is an Arabic word connoting a state of permissibility for objects or actions according to Syariah principles.
The Quran states that: “Eat of what is on earth, lawful and good” (2:168). This verse implies that humanity is expected to eat, use and act in accordance with what is not only permissible but also good, pure or wholesome. The verse expresses the godly commandment using two important words, namely “halal” and “toyyib”.
It is common in the halal market for people to use the terms halal and halalan-toyyiban interchangeably due to a perception that whatever is halal, is also halalan-toyyiban. But actually, the two terms carry two different meanings. The former implies compliance with fundamental Syariah parameters, while the latter goes beyond those fundamentals to invoke enhanced features that make something good, pure and wholesome.
For example, junk food that comply with halal certification requirements are certified as halal. Such certification tells the world that these products do not contain items prohibited by the Syariah while simultaneously complying with the specified legal provisions prescribed by the law of the land. But, although, they are certified as such, eating junk food is unhealthy and could lead to many health issues. Thus, halal certified junk food are halal, but not toyyib.
In Malaysia, the concept of halalan-toyyiban has gained only limited exposure, be they from the perspective of public understanding or in terms of practical application within the halal market itself. From the regulatory perspective, for instance, the laws and regulations related to this concept seems very limited in comparison to those governing the halal concept.
The Manual Procedure for Malaysia Halal Certification 2014, issued by the Department of Islamic Development, Malaysia (Jakim), and 13 other standards on halal issued by the Department of Standards, Malaysia (DOSM), are all focused on halal alone. This might be due to the fact that Malaysia’s current halal certification scheme does not include halalan-toyyiban.
However, there are three areas that require compliance with halalan-toyyiban standards: transportation of goods/ cargo chain activities (MS 2400-(1:2010); warehousing and other related activities (MS 2400-(2: 2010); and, retailing (MS 2400-(3).
The three sets of standards specified in the respective parenthesis are the requirements on halalan-toyyiban assurance pipelines, issued in 2010.
These three sets of standards define halal as “things or action which are permitted or lawful in Islam. It conveys basic meaning and defines the standards of acceptability in accordance to Syariah requirements”. Halalan-toyyiban, on the other hand, is defined as “assurance and guarantee that both aspects of halalan and toyyiban are integrated into holistic and balanced requirements that fulfil the condition, situation and application needs”.
Based on these two definitions, it may be concluded that halal represents the fulfilment of the Syariah requirements leading to the permissibility of an object or action while halalan-toyyiban covers a more holistic approach. Therefore, a clearer demarcation between the two concepts is required within the halal industry.
The halalan-toyyiban concept is seen as a more comprehensive method that seeks to achieve international standards compliance, making it universally acceptable. Hence, more efforts need to be invested by the relevant parties to promote the integration of halal and toyyiban in Malaysia’s halal certification scheme. Although there has been an effort to apply this concept by issuing the three standards on halalan-toyyiban, the current application of this concept is still limited to these three areas.
Since Malaysia aspires to become the global halal hub, it is timely to extend the application of halalan-toyyiban to other areas in the halal industry. Introducing another scheme of halal certification, such as “halalan-toyyiban certification”, would be a good start. It would encourage the halal market players to produce products or services that are not only halal certified but also contain wholesome elements.
For instance, nutritious products that contain halal ingredients and at the same time do not contain any substance that could endanger human health and life, may be certified as “halalan-toyyiban” by the certifying authority upon fulfilment of all requirements set under the relevant halalan-toyyiban standards.
The writer is Research Fellow, International Institute of Advanced Islamic Studies (IAIS) Malaysia
Published in: New Straits Times, Saturday 14 April 2018
Source : https://www.nst.com.my/opinion/columnists/2018/04/357046/difference-between-halal-and-halalan-toyyiban
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